Vacant possession is a term we commonly use in real estate when selling a house, commercial building or when acquiring a leasehold interest.
Occupiers may think that the term need not concern them as something clearly is or isn’t vacant. It seems however that this now may not be so obvious nor is it a term that should be ignored, especially in break clauses.
What is vacant possession?
Vacant possession has been defined as:
…the property is empty of people and…..the purchaser is able to assume and enjoy immediate and exclusive possession, occupation and control of it. It must also be empty of chattels…. (which) substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property.
Consideration of the requirement for vacant possession is a two-part test. The term requires not only that the property is free of people but also chattels (moveable objects).
Test one - empty of people
NYK Logistics (UK) Limited v Ibrend Estates BV [2011]
Leave no one behind. NYK were tenants of a warehouse. As a condition of their break clause NYK needed to give vacant possession by the break date, but workmen and security staff remained as dilapidation repairs were being carried out. Their landlord claimed that the lease was continuing and the break had not been exercised. The Court of Appeal agreed, confirming the moment vacant possession was required the premises should be empty of all people (and chattels).
Test two – removal of chattels
Riverside Park Limited v NHS Property Services Limited [2016]
Be clear on what constitutes ‘chattels’. In this case, the court held that internal non-structural partitions installed by the tenant were chattels not fixtures as they could be easily removed without damage to the building. As such they should have been removed to meet the vacant possession condition.
Secretary of State for Communities and Local Government v South Essex College of Further and Higher Education [2016]
Don’t leave anything behind. In this case, the occupier served a break notice but at the break date left chattels including a photocopier, computer screen, reception desk and key fobs. The court held that the tenant had not vacated the premises and its actions amounted to abandonment. The chattels were deemed to be stored and the tenant was continuing to occupy the premises.
| Verify if any break conditions, lease or sale terms require vacant possession of the premises – if so then make sure this condition is met in a timely fashion. Anyone in the premises should vacate - this includes employees, security and in fact trespassers. Control – make sure immediate, exclusive occupation, possession and control is given to the landlord (owner or purchaser). All chattels should be removed – this includes furniture, freestanding equipment, debris/rubbish, signage, and non-structural partitioning, Leave nothing behind, even if you no longer want or need it. Necessity to return the keys – ensure that these are given to the landlord. Termination – if the above steps are taken by the occupier this should ensure that the condition of vacant possession is met. |
Comment
Vacant possession should no longer be considered an insignificant term. As recent cases show, occupiers must take care and demonstrate that they have left the premises along with all belongings. The obvious element to the condition, but one that needs to be strictly adhered to, is the removal of all people by the agreed day. What is not so obvious and one that it seems is all too easy to breach, is leaving items on the premises. This includes such items that might not evidently appear as moveable objects on first consideration.
However commercially sensible a particular course of action may seem in delivering up vacant possession under a break clause or contract of sale or in compliance with the yielding up provisions in a lease these are legal obligations which are construed in accordance with the law and not in accordance with commercial pragmatism. The law has little sympathy for common sense approaches if they do not accord with the rules.
