Riverside Park Ltd v NHS Property Services Ltd [2016] EWHC 1313 (Ch)

The High Court has held that NHS’ failure to remove demountable partitioning rendered a break ineffective as it had failed to comply with a pre-condition requiring that vacant possession be given.

Riverside granted to NHS a 10 year lease with break on the 5th anniversary of the term. NHS was required to give 6 months’ notice in prescribed form and to give vacant possession to Riverside on or before the break date to exercise the break. The premises were open plan when the lease was granted but NHS then installed a number of partitions and other items (under licence for alternations) which were not remove before the break date.

Riverside claimed that the partitions were chattels and the break was ineffective as, by their remaining in the premises, vacant possession was not given.

The High Court agreed. Relevant to their decision was that the partitions were:

  1. standard demountable partitions - not fixed to the structure but held in place by screw fixings affixed to the raised floor and suspended ceiling (the existence of electrical installations within the partitions did not alter this view),
  2. their configuration was unique to NHS (creating a “rabbit warren” effect), was generally not what other tenants looked for and did not afford a lasting improvement to the premises, and,
  3. they prevented or interfered with Riverside’s right of possession (reiterating the test laid down in NYK Logistics Ltd v Ibrend Estates)

The court commented that if it was wrong and the partitions were tenant fixtures then the outcome would be the same. The question was what “premises” were to be vacated? By the court’s interpretation the licence for alterations required NHS to have removed the partitions. It was therefore the Premises without the alterations which needed to have been vacated.

Key points

  1. Tenants needing to comply with a vacant possession obligation should take a cautious approach – if in any doubt as to whether there is an entitlement to leave something behind, seek advice. Alterations can complicate the position. It may assist if you are able to secure the landlord’s agreement as to what is required to fulfil the vacant possession requirement.
  2. Although fact specific, guidance was given on whether other items left at the premises frustrated vacant possession. The court concluded that:
    1. Despite earlier cases finding kitchen units to be fixtures, in this instance they were chattels. Equally, floor coverings, window blinds, and water stand pipes within a large meeting room were chattels as they could all be easily removed without injury to the Premises.
    2. Notwithstanding a) in this instance if these items were the only ones left behind (i.e. no partitioning) vacant possession was likely to have been given.
    3. Failing to return key fobs which could be centrally deactivated in the particular circumstances of the case or to deactivate an alarm system did not frustrate vacant possession.
  3. On evidence, the fact that Riverside did not produce specific evidence that it could not let the premises to anybody else did not mean that it had failed to establish that its enjoyment of the premises had been compromised.