Judgment on Definition of Vacant Possession

Up until now, decisions on whether an outgoing tenant had given ‘vacant possession’ of a property were based on a series of tests from an old case. These related to whether or not the tenant had left chattels behind which made the property unusable, and whether or not they were still using the property for their own purposes. This second test was very ambiguous, making for a lot of hotly-contested court cases.

The case of Ibrend Estates BV v NYK Logistics (UK) Ltd was brought by NYK, being the tenant of a warehouse in Rotherham. The lease contained a break clause requiring NYK to give the landlord vacant possession. NYK gave notice and moved out of the premises by the relevant date. However they employed workmen to carry out two days of outstanding repairs the week after the date defined in the break clause.

NYK argued that, although they had workmen in after the break date, they weren’t using the property for their own purposes and weren’t inconveniencing the landlord, who could have taken possession. Ibrend (the landlord) argued that they were using the property to carry out repairs to reduce liability for dilapidation so they hadn’t given vacant possession. The Court of Appeal sided with the landlord.

The Court of Appeal also took the opportunity to redefine the term ‘vacant possession’.

Giving the lead judgment, Lord Justice Rimer said the concept of "vacant possession" was not complicated:

"It means what it does in every domestic and commercial sale in which there is an obligation to give ‘vacant possession’ on completion. It means that at the moment that ‘vacant possession’ is required to be given, the property is empty of people and chattels and that the purchaser is able to assume and enjoy immediate and exclusive possession, occupation and control of it."

This is an important clarification as more or less every single break clause in a Lease has a condition of vacant possession. So tenants will need to be sure they have completely moved out, and that they are complying completely with the conditions.

The case may be argued further if the tenants are successful in getting permission to take it to the Supreme Court.

Oliver Kew

Published on 04/07/2011