13/7/21 – Tenants exercising break clauses: highlights of recent case

Our Lease Advisory team reports on an interesting Court of Appeal decision involving Capitol Park Leeds plc (CPS) vs Global Radio Services Ltd (GRS) this week regarding a tenant exercising their break clause. The tenant handed back the property in an inferior state after stripping the Landlord’s fixtures and fittings, in an effort to leave the property with vacant possession.

The case was initially appealed by the tenant after the Judge concluded the lease must continue because GRS had failed to give vacant possession of the premises in accordance with the break clause. Fittings such as windowsills, fan coil units, ventilation duct work, pipework connections for the fan coil unit system, office lighting, smoke detection system, etc were removed. The evidence before the Judge showed that these features had been part of the original base build specification and so landlord’s fixtures or, perhaps, elements of the building itself.

The lease stated the tenant should ‘give vacant possession of the Premises to the Landlord on the relevant Tenant’s Break Date’. The lease also stated that the tenant agrees to yield up the premises at the end of term ‘in a state of repair condition and decoration which is consistent with the proper performance of the Tenant’s covenants.

The tenant’s appeal was granted as the tenant was to return the premises as they are on the break date free of the ‘trilogy of people, chattels, and interests’. On that basis, GRS’ exercise of the break clause was effective, and the Lease terminated. The landlord was not left without remedy as they retained the right to damages for a breach of repairing covenant.

We are seeing a number of break clauses being triggered and included into new leases over the past 12 months, not least due to the uncertainty the pandemic has provided. Break clauses can be a very tricky area, and it is essential that care is exercised by both sides to prevent disputes, and professional advice should be sought.

If you would like to discuss this or any other lease renewal or rent review query please contact Nathan Young, Francis Tomlinson or Robert Clifford in our Lease Advisory team.