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Fitting Out & Getting Out

Great care is always needed in exercising break options, and the High Court decision in Riverside Park v NHS Property Services is an excellent example of the pitfalls. The NHS had a lease of an office unit, and carried out some alterations, principally the installation of internal demountable partitioning. They took the view, on exercising the break option, that the partitioning came under the heading of tenant’s fixtures, and that according to both the lease and the licence for alterations, they weren’t required to remove them unless the landlord so required. As the landlord didn’t, they left them in situ.

Part of the judgement turns on the NHS not having complied with certain terms of the licence for alterations, and of course more attention should have been paid to that.

Most importantly, though, the judge decided that the partitioning, which was simply screwed to the raised floor and suspended ceiling, remained the tenant’s property under the heading of chattels, not fixtures. As it stood, it created a “rabbit warren” of small offices, which substantially interfered with the landlord’s right of possession of the premises, and leaving it in place amounted to a failure to give vacant possession. Since the break option was conditional upon having given vacant possession, it followed that it had not been effectively exercised. The NHS is left with the ongoing rental commitment which it had hoped to terminate.

It’s easy to assume that what the lease documentation has to say about fixtures and reinstatement is the end of the matter, but the obligation to give vacant possession shouldn’t be overlooked. It’s prudent to sound the landlord out as early as possible before the break date on issues like this, to try to get some clarity as to what’s going to be required.

Author: Mark Shelton,  Commercial Property Management Law Trainer, CPM Law Training Limited and Author of The Lease Guide website

©  Mark Shelton

8 August 2016