18 December, 2020
The recent High Court case of Capitol Park Leeds v Global Radio Services Limited  EWHC 2750 serves as an important reminder of the potential pitfalls for tenants who must provide vacant possession as a pre-condition to exercising their break option.
Global Radio Services Limited ('the Tenant') wished to exercise their break option in a Lease for a commercial unit with Capitol Park Leeds ('the Landlord'). One pre-condition required that the Tenant provided vacant possession at the break date. The Tenant had begun the process of stripping existing fixtures and fittings from the premises, with the intention of replacing these prior to handing the premises back to the Landlord. However, the remedial work was halted before completion and attempts between the parties to reach a settlement agreement as an alternative to completing the works, were unsuccessful.
As a result, the Landlord argued that the Tenant had failed to provide vacant possession of the premises. The High Court held in favour of the Landlord, primarily on the fact that the definition of the 'premises' under the Lease included its fixtures and fittings, thus the Tenant had failed to validly exercise their break option.
This decision emphasises the importance for tenants to, where possible, minimise the obligations they must fulfill before they can validly exercise their break option. This is especially the case where vacant possession is a pre-condition, as any ambiguity regarding what qualifies as vacant possession under the Lease may present unforeseen future complications for tenants, which makes exercising their break option strenuous and expensive. Subsequently, it is important for commercial tenants to also ensure they are mindful of the precise definition of the 'premises' under the Lease and what obligations that may impose on them to provide vacant possession.
For more information contact Helen Marsh in our Commercial Property department via email or phone on 0333 207 4236. Alternatively send any question through to Forbes Solicitors via our online Contact Form.