Capitol Park Leeds Plc and Capitol Park Barnsley Limited -v- Global Radio Services Limited [2021] EWCA Civ 995

Earlier this year, we reported on the High Court decision in Capitol Park Leeds plc v Global Radio Services Ltd [2020] where it was held that a tenant's failure to reinstate fixtures and fittings amounted to a failure to give vacant possession of a property to the landlord.  Full background details can be found in our previous article.

On 5 July 2021, the Court of Appeal handed down their judgment, overturning the decision at first instance.

The Court of Appeal held that the pre-condition requiring that the tenant should “give vacant possession of the Premises to the Landlord on the relevant Tenant’s Break Date” was confined to the requirement of returning premises free from “people, chattels and interests” and was not concerned with the physical state of the unit.

The vacant possession pre-condition was compared with not un-common pre-conditions expressed to be conditional on the tenant having observed and performed covenants in the lease.  In the present case, however, the parties to the lease did not choose to provide for any such requirement, nor did the pre-condition require the tenant to fulfil its repairing obligations under the lease.

The Court of Appeal also considered the yield up provisions, which required the premises to be yielded up with vacant possession “in a state of repair condition and decoration which is consistent with the proper performance of the Tenant’s covenants”. The fact the pre-condition made no mention of repair or condition when clause the yield up provisions did, was described by Newey LJ as a "telling contrast".

Newey LJ also found that the landlord’s argument ran counter to business common sense.  The tenant could exercise the break notwithstanding the fact that the building had been allowed to fall into a dreadful state of repair and become unlettable.  However, it could not do so if a more than minimal number of ceiling tiles were missing.

Our comment

The decision will be welcome news to tenants seeking to comply with vacant possession break pre-conditions.  It also provides clarity that, whilst conditions prescribed in a break clause must be strictly complied with, this does not mean that the clause must be construed adversely to the tenant.  Landlord's remedies will now be limited to seeking compensation for whatever loss it may have suffered from the state of the Premises.

Given the complexities and potential consequences if a break is invalid, we recommend that legal advice is sought if you are considering breaking your lease or have received a break notice.