Vacant position

Vacant possession is an essential part of almost every contract for sale and purchase of land in England and Wales, but what does it mean? Until now, just one Court of Appeal judgment dealt with the question '“ Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264.

This covered cellars under a warehouse, sold with vacant possession, which were rendered unusable by sacks of hardened cement that had been left there. The court awarded damages of £80 to the purchaser and the vendor's appeal to the Court of Appeal was dismissed.

In reasoning which is not easily accessible, Lord Greene MR formulated two alternative grounds for testing whether vacant possession has been given: (1) whether the vendor is using the premises for his own purposes; and (2) whether there is a physical impediment which substantially interferes with or prevents the purchaser's enjoyment of his right of possession.

Now we have been given a definitive explanation of vacant possession by the Court of Appeal in NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] EWCA Civ 683. NYK had a lease of a warehouse in Rotherham; Ibrend was their landlord. The lease contained a break clause conditional upon giving six months' notice and paying rent up to date '“ both of which NYK did; the clause also of course required NYK to give vacant possession of the premises but did not, as many do, require the tenant to have substantially complied with its obligations under the lease.

Two days before the break date, 3 April 2009, surveyors met on site and agreed a list of outstanding dilapidations. By then NYK had moved out leaving nothing significant behind. It was the policy of NYK's retained surveyor to complete the necessary works so far as possible and there were inconclusive discussions about whether NYK should hold over for this purpose. In fact, in the week or so following the break date, workmen employed by NYK went back into the premises and did about two days' worth of repairs.

Ibrend's managing agent learned that workmen were still at the premises when on 7 April he arranged to collect the keys. When visiting the premises he was challenged by a security guard employed by NYK and quickly left; solicitors were appointed and informed NYK that it had not given vacant possession. Proceedings for a declaration were commenced by Ibrend in Sheffield County Court and were successful.

At trial and on appeal Ibrend's principle submission, by analogy with Cumberland ground (1), was that NYK had not given vacant possession because it was using the premises for its own purposes, namely carrying out repairs to reduce liability for dilapidations. NYK's argument that the premises were available to Ibrend if it wanted them, and that the works did not substantially interfere with its ability to enjoy them, were rejected.

Clear definition

The Court of Appeal (Ward, Moore-Bick, Rimer LJJ), dismissing NYK's appeal, agreed, the lead judgment being given by Rimer LJ. His statement of the principle brings together both Cumberland tests and provides a clear definition of vacant possession: 'The concept of 'vacant possession' in the present context is not, I consider, complicated. It means what it does in every domestic and commercial sale in which there is an obligation to give 'vacant possession' on completion.

'It means that at the moment that 'vacant possession' is required to be given, the property is empty of people and chattels 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.'

The result is perhaps harsh for NYK '“ it had effectively moved out of premises for which Ibrend had no use and its workmen were not causing inconvenience '“ but NYK did not comply with the vacant possession condition. This Court of Appeal decision not only resolves ambiguity about Cumberland: it also does exactly what an Appellate Court should do '“ gives property lawyers a clear bright line test with which to advise clients.