Partitions and vacant possession

Many tenants install partition walls into their office suites. At the end of the tenancy, when it is time to deliver up vacant possession of the premises, do these need to be removed? Riverside Park Ltd v NHS Property Services Ltd [2016] EWHC 1313 (Ch) considered this issue and raised two points of importance to property lawyers. First, what is the difference between a fixture and a chattel? Second, what is meant by vacant possession?

Riverside Park granted a ten-year lease of open-plan office space to Wirral Primary Care Trust. The tenant was entitled to terminate the lease under a break clause, but a break notice would only be effective ‘if the Tenant gives vacant possession of the Premises to the landlord on or before (24 September 2013)’.

The tenant gave notice but the landlord argued that it was not effective because the tenant did not give vacant possession due to the presence of items, including demountable metal stud partitions, which it said were chattels. These partitions were not fixed to structural slabs but were only screwed to the top of the raised floor and to the suspended ceiling.

Is a partition a fixture?

His Honour Judge Saffman, sitting as a High Court judge, reviewed the relevant authorities and sources. As to whether something is a chattel or a fixture, the judge referred to Legal & General Assurance Society Ltd v Expeditors International (UK) Ltd [2006] EWHC 1008 (Ch), from which the following principles could be distilled:

• A fixture installed by the tenant for the purpose of their trade becomes a part of the premises as soon as it is installed, although the tenant retains the right to sever the fixture on termination of the tenancy; and

• Whether something is a fixture depends on the degree and purpose of the annexation, in each case looked at objectively. The onus is on the party asserting that they are chattels rather than fixtures to establish that. There is, however, no definitive test and it is ultimately a question of fact.

Here, demountable partitions described as being ‘slightly attached’, ‘in no way fixed to the structure’, and ‘not solidly fixed’ to the floor were chattels. Even the fact that utilities were connected to the partitions did not alter the judge’s view. The very fact that the tenant chose to erect demountable partitioning and not to affix them to the structure suggested that the tenant saw them as temporary.

Was there vacant possession?

The judge referred to a number of tests for vacant possession, in particular whether the seller continues after completion to claim a right to use the premises for their own purposes, and whether the chattels left on the premises by a seller deprive the purchaser of the physical enjoyment of the property.

The last test was further broken down. Vacant possession means that:

• The property is empty of people;

• The purchaser is able to assume and enjoy immediate and exclusive possession, occupation, and control of it; and

• It must be empty of chattels, although the obligation in this respect is likely only to be breached if any chattels left on the property substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property.

Citing the test provided by Lord Greene MR in Cumberland Consolidated Holdings v Ireland (1946) KB 264, the judge was satisfied that the partitions were an impediment which substantially prevented or interfered with the right of possession and which deprived the claimant of their physical enjoyment. The defendant lost.

This case also provides some interesting guidance on the law relating to the construction of documents. When interpreting the lease, the judge referred to Lord Neuberger’s convenient summary of the law in the Supreme Court in Arnold v Britton [2015] AC 1619 that ‘when interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’. It is well known that there must be strict adherence to the conditions specified in the lease to effectively exercise a break clause; ambiguity should be eliminated at the pre-commencement stage where possible.

When advising parties about the end of a lease it is important to take clear instructions as to the nature and extent of any alterations that may have been undertaken during the term. Especially in the case of substantial items such as partitioning, you may need to consider instructing an expert to consider the degree and purpose of their annexation to the premises.

David Sawtell, pictured, and Erol Topal are barristers at Lamb Chambers

@LambChambers

www.lambchambers.co.uk