Vacant possession is a term heard repeatedly in real estate. Under landlord and tenant law, sale and purchase of freehold property, and property development, most property contracts will include a requirement for vacant possession.
But what does this term mean? And, if the vacant possession term is breached, are there legal remedies available?
What is vacant possession?
In general terms, vacant possession means that a property which is sold is free from people, animals (the new owner is unlikely to want to inherit your cat), and chattels. The best way to illustrate how important vacant possession is to examine the consequences of not providing it.
For example, in NYK Logistics (UK) Ltd v Ibrend Estates BV [2011] EWCA Civ 683, a commercial property tenant had a break clause in its contract which required vacant possession upon exercise. The tenant gave the landlord notice of its intention to end the lease in April 2009. Following the receipt of a schedule of dilapidation repairs which would need to be undertaken prior to quitting the premises as per the lease agreement, the tenant hired contractors to complete the work. The repairs were finished six days after the termination date. The landlord argued in court that the break clause was not validly executed and said the tenant owed rent from April to December 2009 (the month the lease was validly terminated).
The Court ruled in favour of the landlord. It ruled that to satisfy the vacant possession condition in the break clause option, it had to give such possession to the landlord by midnight on the designated date and not a minute later.
What is the legal definition of vacant possession?
Vacant possession in a legal context meant that the property had to be empty of people (including contractors) allowing the landlord to assume and enjoy immediate and exclusive possession, occupation, and control of it. This same principle would apply to a purchaser of the property.
The obligation to provide vacant possession can be express or implied. There is usually an express term in the tenancy agreement or sale and purchase contract that the property will be transferred with vacant possession.
There is also an implied obligation to provide vacant possession under the Open Contract Rules. These rules have arisen over time as a result of common law or statute. They apply to property contracts in the absence of specific terms governing certain aspects of the contractual arrangements. The implied term applies unless there is an irremovable obstacle to vacant possession at the time the contract was entered into. If there is a removable obstacle at the time the contract was made and this was known to the buyer, the implied obligation of vacant possession applies.
Buying a property with vacant possession
When you purchase a property with vacant possession, all people and furniture must be gone by the move in date. There are situations where a property is sold without vacant possession, for example, where the property is being sold with tenant in situ.
If you are buying or leasing a property with vacant possession, it is advisable to check the property is clear of people and chattels as soon as possible following completion.
Selling a property with vacant possession
Situations, where the vacant possession requirement will be breached, include:
- where there is a person in unlawful possession of the property, i.e. a squatter
- if large quantities of rubbish or household contents remain on the property and this interferes with the new owner’s enjoyment.
Certain situations whereby people or chattels remain will not result in a breach of vacant possession. For example, in John Laing Construction Ltd v Amber Pass Ltd [2005] L. & T.R. 12, it was reasoned that because of security problems at the property, neither the continued presence of security guards nor the existence of removable concrete barriers prevented the landlord from taking possession.
Top tips when dealing with vacant possession
To ensure you meet your obligation to transfer your property with vacant possession:
- ensure you remove all rubbish, chattels, and animals before the completion date
- make sure there is no one in the property on completion (including contractors, unless specifically agreed)
- hand over all keys to the property
- ensure there is no pre-existing legal obstacle to the new owner’s enjoyment of the property, for example, an existing licence granted to a third-party
If you have any doubts regarding whether you can meet the requirement of selling or leasing a property with vacant possession, or you believe the vacant possession clause in your contract has been breached, it is imperative to seek legal advice immediately.
What to do next
If you require detailed legal advice about vacant possession or any other conveyancing matter, please call us on 0161 941 4000.