The term ‘Vacant Possession’ is one of the most commonly used terms in the real estate profession. A tenant taking a property lease will expect the landlord to give vacant possession and a landlord will expect the tenant to provide vacant possession when the lease comes to an end (either at the end of the term or through the exercise of a break).
In addition, a property developer, acquiring a site for development, may want a seller to deliver vacant possession if he/she intends to redevelop or demolish an existing building.
But what does vacant possession actually mean?
A people and chattel-free zone
Well for starters - vacant possession means that the property must be empty or free of people. In NYK Logistics (UK) Limited v Ibrend Estates BV (2011) it was held that because some workmen remained in a property to finish off some works after the break date, the tenant had not given vacant possession and the break failed. This was in spite of the tenant having informed the landlord in advance.
Vacant possession also requires the property to be empty of chattels such as furniture and boxes. The test here is whether the chattels left behind substantially interfere with or prevent the enjoyment of the right of possession for a substantial part of the property.
As an example, a small number of empty pallets and dismantled racking in a large warehouse didn’t cause problems for the tenant in Legal & General Assurance Society Limited vs Expeditors International Limited (2006). On the other hand, when the seller in Cumberland Consolidated Holdings Limited v Ireland (1946), left a substantial amount of rubbish there was a breach of the vacant possession condition.
Top tips for vacant possession
So, if you need to give vacant possession, what are the top tips?
- Make sure there is no one left at the property after the date when vacant possession should be given;
- Make sure there is no furniture left at the property – if in doubt remove it;
- Make sure there is no one else with a right to occupy, for example, make sure any lease, sub-leases and licences have been terminated; and
- Make sure you hand over the keys.
Legal impediments to vacant possession
In a straightforward case, vacant possession means the absence of people or chattels. However, there are several examples where an outstanding legal claim has caused a breach of vacant possession – and there have been some very obscure ones over the years.
In 2000, a Mr Baylis sold land with vacant possession, which fronted the main road. It subsequently transpired that the Highways Authority claimed the land had been dedicated as a highway for road-widening work. Therefore Mr Baylis was not in a position to sell it with vacant possession. The purchaser successfully sued for damages. In another case, a ground floor flat in a house was sold with vacant possession. Unfortunately, a clause under a relevant Housing Act meant that only one household could occupy the whole property. As the first floor flat was occupied, the seller was not in a position to give vacant possession.
The moral of the story is to ensure that any potential legal claims are thoroughly investigated and not just rely on an empty building.