The case of NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] EWCA Civ 683 highlights that tenants must be extremely cautious when trying to comply with any conditions of a break clause and landlords also need to be careful not to waive any rights.

In this case the tenant had exercised its option to break the lease, which was conditional on the rent being paid up to date on the break date and the tenant giving vacant possession. It was not conditional on the state and repair of the property. The break clause did, however, allow the landlord to waive conditions if they were not satisfied, although it was not obliged to.

The tenant served a valid break notice but decided that it wanted to carry out any repairs to the property itself to keep costs down and avoid a dilapidations claim. The repair works were not completed by the break date and the landlord had not responded to the tenant’s request for extra time to complete the repairs. After the break date the tenant instructed its workmen to re-enter the property and complete the repair works.

The county court found in favour of the landlord, concluding that the tenant had not terminated the lease, as it had not given vacant possession because its workmen had stayed on the property. The court also held that there had been no waiver by the landlord, as the making of arrangements to collect the keys was not an unequivocal assertion that any breach by the tenant was waived, and the landlord’s agent had not realised that the tenant’s conduct amounted to a failure to give vacant possession. The court of appeal upheld this ruling, stating that vacant possession in these circumstances required the property to be empty of people, the landlord to be able to assume and enjoy immediate and exclusive possession, occupation and control of the property and the property to be empty of contents (unless this did not substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property).

As the landlord had not agreed to any extension of time, the court stated that the tenant should have moved everyone out of the property on the break date and delivered the keys to the landlord on the break date. The tenant then should have contacted the landlord the following day to request permission to complete the remaining repair works as a licensee.