When selling a home or commercial premises, it will be usually be sold with “vacant possession”. General Condition 17 of the 2019 Conditions of Sale states that “the Purchaser shall be entitled to vacant possession of the Subject Property on Completion”. Similarly, it is often a pre-condition to exercising a break clause in a commercial lease and under the yielding up provisions that vacant possession be given. Failure to deliver vacant possession can result in additional costs and potential litigation.
Despite the importance of handing over vacant possession on closing a sale, this term is not defined in Irish legislation. There have been a number of cases in the UK which discuss the concept of vacant possession. The court in NYK Logistics (UK) Limited v Ibrend Estates BV held that vacant possession means “the property is empty of people and that the purchaser is able to assume and enjoy immediate and exclusive possession, occupation and control of it. It must also be empty of chattels, although the obligation in this respect is likely only to be breached if any chattels left in the property substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property”.
There are a number of elements which must be satisfied to ensure vacant possession is handed over, including:
- The property must be free of people
In the Ibrend Estates case the exercise of a break clause in a lease was conditional upon payment of rent and delivery up of vacant possession by the break date. The tenant organised works to be carried out pursuant to a schedule of dilapidations served by the landlord after the break date. The tenant had informed the landlord of the works prior to carrying them out. However, the court held that this amounted to a failure to hand over vacant possession and the purported exercise of the break clause failed.
- The property must be free of chattels
In Riverside Park Ltd v NHS Property Services Ltd the landlord granted a 10-year lease to the NHS with a break on the 5th anniversary of the term on the condition that the NHS was to give 6 months’ notice in the prescribed from and vacant possession to Riverside on or before the break date to exercise the break. The NHS installed a number of partitions and other items under licence and did not remove them before the break date. The High Court held that the partitions were chattels and the break was ineffective as, by their remaining in the premises, vacant possession was not given. The Court also commented that kitchen units, floor coverings, window blinds, and water stand pipes within a large meeting room were chattels as they could all be easily removed without injury to the premises. However, failing to return key fobs which could be centrally deactivated in the particular circumstances of the case or to deactivate an alarm system did not frustrate vacant possession.
In Viscount Securities Ltd v Kennedy the local authority deposited soil on the lands subject to sale some days before a completion notice was served, which the vendor was not aware of. Once the vendor became aware of the soil, it was removed within 24 hours. The Supreme Court nevertheless held that because it was there at the date of service of the completion notice, the notice was invalid as the vendors were in breach of their obligation to furnish vacant possession on completion.
In Secretary of State for Communities and Local Government v South Essex College of Further and Higher Education the tenant served a notice to exercise a break clause in its lease and purported to quit the premises. However, it left non-structural partitions, a photocopier, computer screens and a reception desk in the premises. Additionally, it did not hand back its key fobs. Despite the tenant’s arguments that the items that it had left behind were readily movable and did not affect the landlord’s ability to retake possession of the premises; and the partitions were items for reinstatement as part of a dilapidations claim, the court held that vacant possession had not been handed over.
There is a difference between chattels and fixtures, the latter of which can be left at the premises without frustrating vacant possession. The two key factors for determining whether a chattel has become a fixture, are:
- The extent to which the item is annexed to the land; and
- The purpose for which the item was brought onto and annexed to the land.
In Elitestone Ltd v Morris it was held that a bungalow which was situated atop concrete blocks but not attached to them could not be removed either as an entire unit or in sections without being destroyed. Whether a structure becomes part of the land itself depends on the degree of annexation, and a house which cannot be moved without being destroyed cannot have been intended to be a chattel but must have been intended to form part of the land.
- There must be undisturbed enjoyment of the property
Vacant possession may be frustrated where there is a legal obstacle to the enjoyment of the property, such as an order to requisition the property or a compulsory purchase order served by the local authority. In Topfell Ltd v Galley Properties Ltd a notice under the Housing Act limiting occupation was previously held to prevent there being vacant possession.
In Secretary of State for the Environment v Baylis and Bennett the Court held that vacant possession of the land could not be given as the highway authority would have the right to possession rather than the owner of the sub-soil.
It is evident that when selling a property or exercising a break clause in a lease and vacant possession is required careful consideration must be given to ensure all belongings are taken from the premises when leaving as the Courts construe this term strictly.