Breaking point - landlord retains thousands in rent

A commercial landlord has retained thousands of pounds in rent following a dispute about when do vacant premises become legally vacant. Peter Sutherland explains why other landlords are studying the case so carefully.

The number of legal disputes about break clauses has soared during the recession and with tens of thousands of pounds at stake, it's not hard to see why.

In a recent case, commercial landlord Ibrend Estates BV managed to win an extra six months rent event though its tenant NYK Logistics had emptied the premises and moved out by the due date.

The dispute centred on when do vacant premises actually become vacant in legal terms.

NYK had rented a warehouse from Ibrend that had two break options.

The first date was for April 2009 and the second was for December 2009.

NYK decided to exercise the break clause on the April date. Ibrend drew up a schedule of dilapidation repairs that needed to be carried out in accordance with the lease.

A site inspection was carried out two days before the termination date. The warehouse was then empty and all the tenant's fixtures and fittings had been removed. NYK agreed that a few more minor repairs were needed and arranged for the work to be done.

However, its contractors didn't complete the repairs until six days after the termination date. Ibrend said this meant the break clause had not been properly exercised and demanded rent until the next termination date in December.

NYK disputed this but the court found in favor of the landlord.

NYK appealed on the basis that it was unjust to to say a failure to complete a few minor repairs on time amounted to a failure to give up vacant possession. It also submitted that it had not tried to exclude the landlord from the premises after the break clause termination date.

The Court of Appeal, however, upheld the original decision. It held that the fact that the tenant had not tried to exclude the landlord from the premises was irrelevant. What mattered was that the tenant had failed to satisfy the conditions of the break clause. These demanded that the tenant had to give up possession to the landlord by midnight on the designated date and not a minute later.

Landlord and tenants disputes over technical legal points have increased over the last few years and with the economic climate remaining difficult, that trend is likely to continue over the next few years.

For more information please email Peter Sutherland psutherland@andersonssolicitors.co.uk.