Lease termination generally calls for delivering vacant possession to the landlord. Oliver FitzGerald of Mason Hayes & Curran LLP explains what that entails.

Vacant possession is a term used to describe the usual basis on which a seller must deliver a property to a buyer on completion, or a tenant must deliver to a landlord on lease expiry. Although there is no clear Irish authority on the definition of the term, there have been a number of interesting cases in the UK where the meaning of vacant possession has been discussed.

Simply put, vacant possession means that the person entitled to the property, such as a buyer or landlord on lease expiry, is able to enjoy the property undisturbed. In general, this means that the property should be free of occupiers, items, and third-party interests.

Vacant possession is generally of relevance in the following circumstances:

• when a property is being sold, as the general conditions of sale state that a buyer is entitled to vacant possession on completion;
• on the expiry or termination of a lease (yield-up obligations in leases generally place an obligation on the tenant to deliver vacant possession to the landlord on expiry); and
• on the exercise of a tenant break option (break clauses in leases are often conditional upon the delivery of vacant possession by the tenant to the landlord, on or before the break date).

If a seller or tenant continues to use the property in a manner that is inconsistent with the concept of vacant possession, or if there is an impediment to enjoying the property, it may be impossible to deliver vacant possession.

The following are some interesting circumstances that UK courts have considered in the context of vacant possession, though it is not necessarily the case that UK case law will be followed in similar proceedings before Irish courts.

In Association with

People
After exercising a break option, workmen hired by a tenant remained on the property after the break date to attend to repairs to the property. The court held that the tenant failed to deliver vacant possession.

Items
Removable partitioning installed by a tenant during the lease was left behind on the property after the break date. It was held by the court that this deprived the landlord of physical enjoyment of the property.

A tenant stripped the property of fixtures and fittings. In the first instance, the court held that the property was ‘unoccupiable’ and vacant possession had not been given. On appeal, the Court of Appeal held that the obligation to deliver vacant possession did not refer to its physical condition.

Third-Party Interests
Where a local authority had served notice to enter the property on sale under a compulsory purchase order, it was held to be a legal obstacle to vacant possession in the context of a sale.

Serious Consequences
Careful consideration should be given to the obligation to provide vacant possession to avoid costs and potential litigation. If delivery of vacant possession is a condition to the exercise of a break option in a lease, failure to deliver same could mean that the exercise of the break is invalid. On the sale of a property, failure to provide vacant possession could leave the seller open to a buyer seeking specific performance, damages, or rescission of the contract for sale.

Oliver FitzGerald (pictured) is partner in the real-estate department at Mason Hayes & Curran LLP. 

For more information, visit MHC.ie.