Today's post concerns something of the utmost importance to both Landlords and Tenants- the operation of break clauses in the commercial Lease. It will examine the 2011 case- Ibrend Estates v NYK Logistics (Ibrend).
In this climate the Landlord will not want an empty, unproductive rates attracting property. The Tenant may want a less onerous Lease or simply to move to a better location. Either way, the Landlord will not let the Tenant get away so easily and will interpret break clauses strictly.
The case of Ibrend concerned a break clause, in a Lease, subject to a pre - condition. The pre -condition was that the Tenant had to give 'vacant possession' in order to break the Lease. When breaking the Lease, the Tenant was carrying out repair works to the property (in order to avoid any dilapidations claims). The Tenant stayed in the property, after it had attempted to break the Lease, carrying out the works. The Tenant believed that the Landlord had waived its obligation to leave the premises immediately. This was not correct. Vacant possession meant that the property was empty (at the moment it was required to be given) and that the purchaser could enjoy immediate and exclusive control of it. Thus, the Landlord was able to successfully argue that the Tenant had not given vacant possession and could not break the Lease.
What does this mean for Tenants? the Tenant must leave the property at the moment he is required to give vacant possession. He cannot assume that the Landlord has waived the obligation on the Tenant to leave the property immediately. Obviously, the Tenant should comply with its repairing obligations throughout the Lease term, but the property should be in the same condition as it was at the start of the Lease. The Tenant should take a set of signed and dated photographs of the property at the start of the Lease (which should then be put into a 'Schedule of Condition' and annexed to the Lease). This should therefore save time and money as the Tenant will know precisely what state the premises should be left in. A failure to leave immediately means that the Tenant will be stuck in a property that s/he does not want. Landlords will treat break clauses strictly. Tenants should save time and money by compiling a Schedule of Condition and by leaving the property immediately (once s/he wishes to break the Lease). Suffice it to say, that the Tenant should have records of all payments s/he has made under the Lease to avoid an Avocet v Merol situation (see earlier post on this case).
Following the above will ensure a broken Lease and not a broken heart!
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