Landlord and Tenant: Whether a tenant gave vacant possession where it removes landlord’s fixtures (Capitol Park Leeds v Global Radio – 2021)

Vacant possession is a common condition of a break clause. This case addresses whether a tenant gives vacant possession in the event that it removes too much from the property, including fixtures and property belonging to the landlord, rather than too little as is usually the case.

The background

In Capitol Park Leeds v Global Radio [2021], the tenant took an assignment of a lease in 2014. The term expired in 2025, but the tenant enjoyed the right to break the lease in 2009 or 2017. Exercise of the break was conditional on, amongst other provisions, the tenant giving vacant possession.

The lease defined ‘the Premises’ as including ‘all fixtures and fittings at the Premises whenever fixed’. The tenant opted to break the lease in 2017, and stripped out the premises before vacating, removing items including ceiling grids and ceiling tiles, window sills, lighting and other fixtures. According to evidence, these were part of the original build and considered landlord’s fixtures or otherwise part of the building structure. The landlord brought a claim against the tenant in respect of vacant possession, arguing that the term meant a return to the landlord of the ‘Premises’ which included the fixtures and property falling within that definition. The landlord argued that the Premises had not been returned and the break clause had not therefore been operated. The High Court found in favour of the landlord, but the tenant appealed.

The decision

The Court of Appeal allowed the appeal, finding in favour of the tenant. In its judgment, the court stated that the ‘vacant possession’ provision provided not for a return of the premises as defined, but that the premises should be returned free of the tenant’s chattels, people and interests. Whilst conditions relating to break clauses should be complied with, this does not require strict interpretation of wording such that this is adverse to the tenant.

The Court stated in its judgment:

1. The break clause did not include a condition that the tenant ‘observed and performed its covenants’.
2. To interpret the vacant possession provision as the landlord argued may result in issues which were unintended, such as where damage had been caused by an intruder or by an insured risk.
3. The landlord’s interpretation of vacant possession resulted in a contradiction between the ‘yield up’ covenant to return the premises in a ‘state of repair condition and decoration which is consistent with the proper performance of the tenant’s covenants’ and the break clause, but the definition of ‘Premises’ must remain the same in both instances.
4. To decide the claim in favour of the tenant would not remove the landlord’s ability to bring a claim for damages against the tenant for a breach of covenant.
5. Use of the term ‘the Premises’ may also be interpreted as ‘the Premises as they are from time to time’.

The ‘vacant possession’ condition required the tenant to return the premises free of ‘chattels, people and interests’, and the break clause had therefore been effective.

Advice and action for landlords

Landlords should be aware of this decision, and the risk of a tenant leaving premises having removed fixtures over and above those added by the tenant itself.

We recommend that, where landlords wish to have premises returned with particular fixtures still in situ, they ensure lease wording is incorporated into break clauses to state expressly that, where relevant, specific items are to remain in the premises on exercise of a break clause. Landlords do still enjoy the right to seek a claim for breach of covenant where landlord’s fixtures are removed from the premises, but, as ever, express clarification through lease wording is advisable.