What does ‘Vacant Possession’ in your break clause mean?

Since the much anticipated and discussed BREXIT hit the UK, everyone has wondered what will happen next and how it will affect the commercial market.

In the short term, there has been little effect on rental levels for commercial properties in central London. However, one noticeable change in the market is the comeback of break clauses. During the top turn of the market it became very difficult to negotiate a break clause at year three of five year terms, as landlords knew demand was high enough that they could afford to wait for an occupier who would commit for the longer period.

Now that the need for flexibility has become crucial to a lot of occupiers, and supply has increased, break clauses are becoming a common part of many leases. However, just because you have a break clause doesn’t mean you are able to exercise it. Many break clauses come with the condition “must be provided in vacant possession”, but what exactly does this mean? The space must be given back to the provider empty, something that sounds easy enough. But what many occupiers don’t realise is that leaving in a simple fixture or fitting will violate your break and you will be liable until the end of your lease term. Another term often included is that the clause can only be exercised if rent and service charges are paid in full.

Eugene O’Sullivan, a Chartered Surveyor and Managing Director at Morgan Pryce says; “Having a break clause is great, but it’s vital that it is worded in a way that does not restrict it being exercised.”

This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.