Overview

An eagerly awaited decision by the Court of Appeal has underlined the need for tenants to comply with all conditions attached to a break clause – and the risks they take in not doing so.

In NYK Logistics (UK) Ltd v Ibrend Estates, the tenant served its landlord with a break notice to end its lease on 3 April 2009. The tenant’s option to break the lease was dependent on its compliance with two conditions – to pay all outstanding rents and to give up vacant possession on 3 April 2009. On 1 April the tenant was still carrying out repair works to the premises. It attempted to agree that it could remain at the premises after 3 April as a licensee in order to complete the works. An agreement on this point was never reached. On 4 April 2009, despite various attempts by the tenant to resolve the situation, it still had belongings at the premises, repair works were outstanding, and security personnel were at the site.

The tenant’s contractors completed the repair works a few days later. The landlord refused to accept delivery of the keys and claimed that the tenant had not given vacant possession on 3 April 2009. As such, it had not validly exercised the break clause, and the lease continued. In this briefing. Shoosmiths discusses the implications of this ruling.