Cases - NYK Logistics (UK) Ltd v Ibrend Estates BV

Record details

Name

NYK Logistics (UK) Ltd v Ibrend Estates BV

Date

[2011]

Citation

EWCA Civ 683

Keywords

Commercial property - property management - dilapidations - tenant's break clause - break date invalid

Summary

The tenant occupied warehouse premises under a lease from the landlord. The lease was renewed in April 2008 for a further term of 2 years. It contained a tenant’s break clause permitting the tenant to terminate the lease on 3 April 2009 by giving 6 months’ prior notice to the respondent, provided that the rent was up to date and the tenant had delivered up vacant possession. There was a further option to break the lease at a later date.

The tenant gave notice to break the lease. The landlord prepared a terminal schedule of dilapidations. However, this was initially done on an incorrect basis and the issue was not resolved until a meeting between the parties on 1 April 2009. It was agreed on that date that the tenant had substantially complied with its repairing and redecorating obligations, although some outstanding items of repair were identified. Since it would not be possible to carry out those works by the break date, the tenant suggested that it could complete them within the following week, continuing its security cover of the premises in the meantime but returning the keys on the break date. Further communications ensued on that matter and regarding the return of the keys; meanwhile, the necessary repairs were completed by 9 April.

The landlord contended that the tenant had not effectively broken the lease in April 2009 because it had failed to give vacant possession on the break date.

‘Vacant possession’ was not a complicated concept, but meant the same as it did in every domestic and commercial sale in which there was an obligation to give vacant possession on completion. At the moment vacant possession was required to be given, the property had to be empty of people and the purchaser had to be able to assume and enjoy immediate and exclusive possession, occupation and control of it. The property also had to be empty of any remaining chattels that substantially prevented or interfered with the enjoyment of the right of possession of a substantial part it.

The tenant had not given vacant possession to the landlord on 3 April 2009. Although the repair works benefited the landlord, the tenant did not have to carry them out as a condition of the exercise of the break option. It wanted to complete the works in order to avoid the prospect of a subsequent claim for damages exceeding the cost of performing the works. It had done nothing by midnight on 3 April to show that it was giving up possession. Although it had offered to return the keys, it had not done so. It had maintained the same control of the warehouse as it had prior to the break date. It had remained in occupation and had not therefore given vacant possession. That was so notwithstanding that it would willingly have downed tools and left had the landlord so requested.

The tenant’s proposal to the landlord regarding the completion of the works had been sensible. In substance, it had proposed that it should give possession on 3 April and make a brief return to the warehouse after that date as the landlord’s licensee. However, it had known that, in order not to prejudice the operation of the break option, it needed to obtain the landlord’s agreement to that proposal by 3 April and had not done so. It should have known that, in those circumstances, the only safe course was to move everyone out of the warehouse, including its security guard, and to inform the landlord of that and that it would deliver the keys to the landlord’s agent on the same day. It could then have contacted the landlord asking whether it could return to the warehouse as licensee in order to complete the outstanding works. It had not done so, but had instead remained in possession.