205: Break rights – when does giving vacant possession go too far?

What happens when a tenant removes too many fixtures and fittings when giving vacant possession of a premises after service of a break notice?

In Capitol Park Leeds Plc v Global Radio Services [2020] EWHC 2750, the tenant stripped out so many features from a commercial premises on exercise of a break clause that the premises was held to be un-useable and did not give vacant possession.

Facts

The subject of the dispute was a recording studio leased from Capitol Park Leeds to Global Radio. Global exercised a break clause in the lease and, after the break date, Global returned the keys to the property.

Before the returning the keys, Global had started dilapidations works and stripped out a large number of substantial features and fittings. This included the removal of ceiling grids, ceiling tiles, floor finishes to the premises and common areas, window sills, ventilation ducts, pipework, lighting, radiators, heating pipes, floor boxes, fire barriers and more.

It stopped work in the hope of negotiating a financial settlement and surrender with the landlord, but was unable to do so. The tenant did not manage to replace the elements of the premises before the break date.

Arguments

Capitol argued that in returning the property minus those elements, Global was not complying with the condition in the break clause to give vacant possession. The property was not capable of being occupied as it was merely an empty shell.

Global argued that, while it may be in breach of the repairing obligations in its lease, it still gave back the premises with vacant possession and complied with the terms of the break clause.

Decision

The judge held that the tenant had not complied with the break condition. The premises that Global delivered up on the break date were not the “Premises”, which were defined in the lease as including the original building on the property and landlord’s fixtures (whenever fixed).

Global had left the premises as ‘an empty shell of a building which was dysfunctional and un-occupiable’. The break clause had not been validly exercised.

This was a costly mistake for the tenant and the lease in question may well continue until its expiry in 2025. Permission to appeal to the Court of Appeal has been granted so watch this space.