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Understanding Vacant Possession

There's a fair bet, if you have anything to do with commercial property, that you'll have heard the term 'vacant possession'. Usually, you'll see this on the contract for the sale of commercial property, specifying that the property should be sold "with vacant possession" or subject to a specific lease. This means that, unless you have agreed otherwise, when you take a lease of a property you expect the landlord to provide you with vacant possession and, at the end the landlord expects you to return the property to him with vacant possession.

So, what does this mean in plain English? Isn't it simply whether the place is left empty or not? Unfortunately, it isn't as simple as that. There are two possible tests for deciding whether or not you are looking at vacant possession:

  • The first test looks at the activities of the person who is required to give vacant possession. Are they using the property and if so, is the way in which they're using it immaterial? For example, if you've leased an office but the previous occupier is still using the property, then they will not have given vacant possession.
  • The second test looks at the physical condition of the property from the perspective of the person moving in. If you cannot use the property or substantial part of it because there is something stopping you, then it would not be classed as vacant possession. So if the seller or last occupier leaves rubbish in the property, perhaps including sacks of rubble, then he would not have given vacant possession.

How does this impact on you if you're leaving a property? If you are required to provide vacant possession then you must pass the two-fold test mentioned above. In particular, this means:

  • You must leave the property, as well as all members of your family/employees and everyone else (even trespassers).
  • You must take all your goods with you. That means all tables and chairs, computers, rubbish, building debris… everything.
  • You can stop providing security for the property - it is not your responsibility any more.
  • You must give all the keys to the one entitled to vacant possession.