If you have anything to do with the sale or letting of property, “vacant possession” is a term that you will come across fairly frequently. But what does it really mean – how “vacant” must the property be for vacant possession to have been given?

WHEN DOES VACANT POSSESSION HAVE TO BE GIVEN?

It is common to see an express term that vacant possession will be given, though in the absence of express wording the requirement may still be implied. Vacant possession usually has to be given in the following circumstances:

  • When property is sold or a lease is granted
  • When a tenant vacates at the end of the term
  • When a tenant breaks a lease early, in which case vacant possession may well be a condition of the break

The meaning of vacant possession is relevant to all of these situations, though the consequences of failing to give it vary. The consequences can be particularly serious where vacant possession is a condition of exercising a break.

WHAT DOES VACANT POSSESSION ACTUALLY MEAN?

A property is given with vacant possession if it is empty of chattels (moveable objects) and of people and no-one else has the right or ability to occupy or to possess it. However, depending on the circumstances, vacant possession may still be given even though these requirements haven’t been fully complied with. It’s helpful to look at some examples of when vacant possession has and hasn’t been given, but it’s important to keep in mind is that every situation turns upon its own particular facts.

EMPTY OF CHATTELS

For vacant possession to be given the property must be empty of chattels (for example furniture, pictures and boxes). If items are left in the property, the person giving vacant possession is deemed to be claiming a right to use the property for his own purposes, as a place to store his goods. However, this requirement is likely only to be breached if any of the chattels remaining substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property.

For example, a substantial amount of rubbish will breach this requirement (Cumberland Consolidated Holdings Ltd v Ireland (1946)) while a few empty pallets and some dismantled racking in a large warehouse probably won’t (Legal & General Assurance Society Limited v Expeditors International Limited (2006)).

It’s also important to understand the distinction between chattels and fixtures: the traditional test of whether an item is a chattel or a fixture is to look at the “degree of annexation” – an item is a fixture if it is attached to the property in a way which will damage the item or the property if it’s removed (Berkley v Pulett (1977)). However, the modern test looks at the purpose of annexation: why, objectively speaking, was the item affixed to the land? If it was intended to provide a short-term improvement for the benefit of a tenant (rather than a long-term improvement to the property) it is likely to be classified as a chattel. For example, demountable partitioning (the thin walls which separate modern offices) may be classed as chattels where the configuration is such that it is uniquely useful to the tenant (Riverside Park Ltd v NHS Property Services Ltd (2016)).

As a general rule, fixtures form a part of the property so there should be no breach of the vacant possession requirement if these remain (and removal of them may in fact be a breach, particularly where the property is being sold and the purchaser is expecting them to be included as a part of the sale). You should however check the wording of your particular lease, as it was held in Riverside Park (above) that had the partitioning amounted to fixtures, it would not have been part of the property (as there was an obligation to remove it) and would have prevented vacant possession being given.

EMPTY OF PEOPLE

For vacant possession to be given the property must be empty of people. For example, where an employee was found on the premises the day after vacant possession should have been given, cleaning the property, it was held that vacant possession had not been given (Expeditors International Limited (2006)). Similarly, where workmen remained in the property to finish off some work after the break date, even though the landlord had been notified of this and had been told that the workmen would get out as soon as the landlord asked them to, vacant possession was not given (NYK Logistics (UK) Ltd v Ibrend Estates BV (2011)).

However, where security is an issue, and it has not been possible to return the keys to the landlord, the continued presence of security guards and removable concrete barriers may not prevent vacant possession being given (John Laing Construction Ltd v Amber Pass Ltd (2005)).

Where someone is in unlawful possession of the property (ie squatters) it is not clear whether this breaches the vacant possession requirement: while there is some authority to suggest this (an obiter statement in Cumberland Consolidated Holdings Ltd v Ireland (1946) and discussion in a leading textbook) there is also obiter authority to the contrary (Sheikh v O’Connor (1987)).

NO-ONE ELSE WITH A RIGHT TO POSSESS

For vacant possession to be given there must not be anyone else with a right to possession of the property. This means that vacant possession will not be given if anyone has a lease or an occupational licence in respect of the property, even if they are not in fact in possession of it (Beard v Porter (1948)).

However, reduced rights of possession such as a profits à prendre (essentially rights to take something from someone else’s land, for example mineral rights, grazing rights, the right to cut down timber or hunting or fishing rights) do not prevent vacant possession being given.

NO LEGAL OBSTACLES TO POSSESSION

For vacant possession to be given there must not be any legal obstacle to the taking of possession. For example, where a notice has been served to enter the property as part of the compulsory acquisition by the local authority, vacant possession will not be given (Korogluyan v Matheou (1975)). However, where a notice has been served but it does not confer any immediate right to possession this will not prevent vacant possession being given (E Johnson & Co (Barbados) Ltd v NSR Ltd (1996)).

WHAT HAPPENS IF VACANT POSSESSION ISN’T GIVEN?

Where vacant possession is a condition of a break, failing to give this has very serious consequences for the tenant. The lease will not terminate and the tenant will remain bound. Tenants should resist an obligation to give vacant possession as a condition of a break and should instead agree only to give up occupation of the premises and to terminate any other interests (such as sub-tenancies).

Where vacant possession is being given on the sale of property a buyer has several options prior to completion: he can apply for specific performance (including the giving of vacant possession) and damages; he can rescind the contract and recover the deposit, plus claim damages; or he can proceed to completion and then claim damages. If the buyer only discovers that vacant possession has not been given after completion he is probably still able to terminate, provided that he takes action as soon as he discovers this. The availability and amount of damages depends on any express terms, the particular circumstances and the nature of any losses.

If a tenant fails to give vacant possession of the end of the lease the landlord’s remedy is damages (again subject to the particular circumstances and the nature of any losses).

PRACTICAL TIPS

If you need to give vacant possession you should make sure that:

  1. There are no people at the property after the point at which vacant possession must be given.
  2. There are no moveable items left at the property – while this is a question of degree, the safest course of action is to remove everything.
  3. There are no fixtures left at the property, if the lease requires them to be removed.
  4. There is no-one with an ongoing right to possession – ensure that any leases and licences have been properly terminated.
  5. You hand over the keys – make sure the person that you are giving up vacant possession to is able to take immediate physical possession of the property and that you are no longer able to do so.

However, remember that every situation turns on its own facts so if you realise that you have failed to comply fully with any of these it doesn’t necessarily mean that vacant possession has not been given.