The Court of Appeal handed down their judgement for the case known as Capitol Park Leeds Plc and another v Global Radio Services Ltd  EWCA Civ 995 in July 2021. The case involved a detailed investigation of tenant break clauses and specifically, vacant possession. B P Collins’ commercial property solicitors look at the case in detail and shares what both landlords and tenants can learn from the matter.
In the case of Capitol Park Leeds Plc and another v Global Radio Services Ltd  the court heard both sides to the argument of whether Global Radio Services Ltd (“the Tenant”) had terminated their lease successfully by the exercise of a break clause within their lease. The High Court initially ruled in favour of Capitol Park Leeds Plc (“the Landlord”) that Global Radio Services Ltd had failed to give “vacant possession of the Premises” in line with the terms of the break clause and so should remain at the Premises for the remainder of the term.
The lease in question was dated 4 March 2002 and was for a term of 24 years from 12 November 2001. Global Radio Services Ltd took assignment of the lease in 2014. Global Radio Services Ltd sought to bring the lease to an end on 12 November 2017 by exercising the “option to determine.”
The ability for the Tenant to terminate the lease was conditional on four requirements. It was the condition that Global Radio Services Ltd “gives vacant possession of the Premises to the Landlord” which is what was argued before the courts.
The “Premises” was defined in the lease as “all fixtures and fittings at the Premises whenever fixes, except those which are generally regarded as Tenant’s or trade fixtures and fittings, all additions and improvements made to the Premises”
Global Radio Services Ltd went on to strip out from the Premises a range of items, including ceiling tiles, fire barriers, floor finishes, window sills, ventilation duct work, pipework connections, office lighting and sub mains cables to name a few once they had exercised its break option. These items were part of the original build specification and either the Landlord’s fixtures or elements of the building itself.
The High Court stated the Tenant could not hand back an empty shell of a building which was dysfunctional and unoccupiable. It was ruled that the Tenant gave back “considerably less than ‘the Premises’ as defined in the lease” and vacant possession was not given. In other words, the Tenant’s exercise of the break clause was ineffective, and the lease should continue.
However, when the case was brought before the Court of Appeal it was determined that vacant possession did not concern the physical condition. The ruling stated that vacant possession requires a property to be returned free of people, chattels, and legal interests. As such, it was decided the Tenant did provide vacant possession and complied with the break clause and so the lease should come to an end.
The judgement ruled that vacant possession was provided by the Tenant as the Premises was returned free of the “trilogy of people, chattels and legal interests”.
The ruling of this judgement does not mean Tenants can give back a property in a terrible and dysfunctional state and be free from all consequences. To remedy the actions of Global Radio Services Ltd, Capitol Park Leeds Plc sought compensation for any loss it may have suffered.
The Court of Appeal explained that a tenant who wishes to exercise a break clause must do so by complying fully with the conditions attached to the break clause in question, but the conditions should not be interpreted as to favour the landlord.
At B P Collins LLP we assist both tenants and landlords and so if you are thinking of taking or granting a lease and would like advice, our Commercial Property team can assist. Email our team at firstname.lastname@example.org or call 01753 889995.
To sign up for free legal articles from across the firm, please email email@example.com.