Q. I am the tenant of commercial premises under a ten year lease, and I have served an option to break terminating the lease in six months' time. This option to break is subject to a condition to give vacant possession of the premises and to have complied with all repairing covenants in the lease. I have carried out works to the premises during the term under a licence for alterations, which include large amounts of partitioning, window blinds,  an alarm and kitchen units. I am anxious for the break to be effective. What kind of issues do I need to consider?

A. The break clause will only be effective if all of the conditions attaching to it have been satisfied.  The condition to provide vacant possession won't be complied with where there is any impediment that substantially prevents or interferes with the right of possession of a substantial part of the property. 

In order to decide whether or not the alterations outlined above need to be removed to exercise the break, the first question to address is whether or not they are chattels.  Chattels are items that are not fixtures and a tenant is generally obliged to remove its chattels at the end of the term.  By contrast if an item is a fixture the tenant does not need to have removed it to provide vacant possession to the landlord.  Whether a chattel has become a fixture is determined by the extent to which it is annexed or attached to the land and the purpose for which it was brought onto and annexed to the land.  The item will not be a chattel if physical removal is unable to take place without causing substantial damage to the land and if use of the item as a chattel will be lost as a result of the removal. 

In a recent case which involved demountable partitioning, the court ruled that the partitioning was a chattel and therefore needed to be removed for a break conditional on vacant possession to be validly exercised.  This was on the basis that it could be removed without damage to the partitioning itself or the property as the partitioning was not fixed to the structure.  The court decided the partitioning was for the benefit of the tenant, rather than providing a lasting improvement to the property.  Therefore, if the partitioning is demountable, the safe approach will be to ensure that it is removed before the break date.  This also applies to the other alterations that have been made to the property. 

In respect of the second condition to comply with all repairing covenants in the lease, unless this covenant is qualified in some way, the safe approach will be to instruct a surveyor to prepare an exhaustive report of what repairs are necessary and carry them out before the break date.  This will include very minor items of repair and damage, and it is to avoid any potential arguments that the landlord may raise to prevent the tenant exercising the break.  If the condition to comply with all repairing covenants is not qualified as being in relation to substantial or material breaches, any breaches, no matter how trivial (for example wood rot in window sills or a property being left uninsured for only a few days), can potentially invalidate a break.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.