Yesterday the Court of Appeal reminded landlords and tenants that a party exercising an option to determine a lease must strictly comply with the obligation to give vacant possession where it is a condition precedent, otherwise the lease will continue.

In NYK Logistics (UK) Limited -v- Ibrend Estates BV the Court of Appeal had to consider what amounted to the giving of vacant possession.

NYK, the tenant, sought to exercise its option to determine its lease.  It was a condition precedent that vacant possession of the property be delivered up.  On the break date, NYK was still in the property carrying out the final dilapidation works.  It required a few more days to finish the works off and was seeking the landlord’s confirmation that it could carry these out past the break date.  NYK did not receive such confirmation.  However, they continued with the works and entered the property after the break date.  The question before the Court of Appeal was whether they had given up vacant possession.  NYK argued they were not in occupation as such, they were merely carrying out a few outstanding works, they could have immediately ceased carrying out works and there were no items left at the property.

The Court of Appeal decided against NYK, and concluded that at the moment vacant possession is required to be given:

  • the property must be empty of people
  • the landlord must be able to assume and enjoy immediate and exclusive possession, occupation and control
  • the property must be empty of chattels

Given NYK had not handed the keys back, they had retained their security guards to control access to the building and had continued to carry out works to the property past the break date, vacant possession had not been given.

Tenants who have to comply with an obligation to give up vacant possession must ensure that the keys are handed back, the property is empty, both of people and chattels and that any security arrangements it had in place are terminated.  Failure to do so could leave a tenant with all the ongoing lease liabilities.

Case: NYK Logistics (UK) Limited -v- Ibrend Estates BV [2011] EWCA Civ 683