Break clauses and the case of Capitol Park Leeds Plc v Global Radio Services Ltd [EWACA CIV995]

Update 06.05.2022: Click Here for further details on Break Clauses

The recent judgment of the Court of Appeal delivered in July 2021 in the English case of Capitol Park Leeds Plc v Global Radio Services Ltd serves as a useful reference on tenant break clauses in commercial leases.

Background

Global Radio wished to exercise a break option in the lease. One of the pre-conditions to the break clause was that the tenant should “give possession of the Premises to the Landlord on the relevant Tenant’s Break Date”. The lease allowed for two break dates, one being 12 November 2009 and the other being 12 November 2017. Global Radio sought to exercise the break clause on 12 November 2017.

They had stripped the property of various landlords’ fixtures and fittings including the removal of office and emergency lighting, ventilation duct works, radiators and tiles in an effort to limit its dilapidations. Ultimately they were hoping to settle the dilapidations liability with the landlord. Settlement discussions between the parties on the dilapidations ultimately fell through resulting in the property being handed back in a shell like state.

The Landlord argued that the Tenant could not terminate the lease on the break option date as it had not given vacant possession of “the Premises” defined in the lease as including “all fixtures and fittings at the Premises whenever fixed”. The landlord argued the tenant had failed to give back “the Premises” as defined.

High Court Decision

The High Court ruled in favour of the landlord noting that the physical condition in which the property was left was such that there was a substantial impediment to the landlord’s use of the property and thus the break condition was not satisfied.

Appeal

The tenant appealed the decision. The Court of Appeal ultimately overturned the decision of the High Court to rule in favour of the tenant ruling that vacant possession involves a “trilogy of people, chattels, and interests” and is not concerned with the physical condition of the property.

Notably the court remarked that the term of the break clause was not drafted conditional on the tenant performing its covenants in the lease and so weight did not have to be given to the yield up clause in the lease in order for the break option to be validly exercised.  The court noted that the landlord was still in a position to seek compensation under the lease in the normal course for the losses suffered.

While this is an English judgment it still gives a useful insight into how the courts in Ireland might interpret what is meant by vacant possession and how tenant break options are heavily scrutinised before a break option can be successfully exercised.

How we can help

If you have any queries or concerns, or would like to discuss the above in further detail, please feel free to contact Siobhán Whelan in our Real Estate Department (swhelan@bhsm.ie / +353 (0)1 440 8339).

This article is for general information purposes.  Legal advice must be obtained for individual circumstances.  Whilst every effort has been made to ensure the accuracy of this article, no liability is accepted by the author for any inaccuracies.