Preconditions to break clauses within leases are interpreted strictly and depending upon the wording clause, minor (and seemingly trivial) breaches of covenant can prevent a break clause being exercised (Avocet Industrial Estate v Merol Limited being a case in point).
Recent cases have served to emphasise the importance of being absolutely clear as to what compliance with any given precondition will entail. For example, giving vacant possession doesn’t simply mean that a property needs to be free of personnel. Any ongoing use of the premises or part of it which might impede the landlord’s use of the property may be considered to be a failure to provide vacant possession.
This point has been considered by the courts this year in a number of cases (Riverside Park v NHS and Secretary of State for Communities v South Essex College). In each of those cases, the tenant left in place various items which the court considered to be chattels (including partitioning, kitchen units, floor coverings, window blinds and even an intruder alarm). The presence of these items was considered by the court to be such that the tenant couldn’t properly be considered to have given vacant possession and the tenant’s attempt to exercise the break clause was in each case, ineffective.
The lesson to be learnt is clear. Any party intending to exercise a break clause, must be absolutely clear as to what steps are needed in order to comply with the break clause. Any failure to observe the terms of the break (however minor) may mean the lease continues to subsist for the remainder of the lease term.
If you wish to discuss any of the issues raised in this blog, please contact me.