Definition of vacant possession
Vacant possession is the contractual right to exclusive use of a property, both physically and legally, following the sale of a property or grant of a lease. The purchaser or tenant must be free to enjoy the property for the purpose intended, without hindrance from any physical presence or legal impediment.
By way of example, a property developer acquiring a site for redevelopment may stipulate under the terms of sale that vacant possession is required so that the existing property can be demolished. The existence of any licence, lease or other occupational right over the property, even in circumstances where a previous occupier is no longer in occupation, would be a barrier to the developer’s intended purpose – and a breach of the vendor’s obligation to provide vacant possession.
In the case of a tenant giving vacant possession at the end of a lease, the rule is much the same as for a vendor. As such, a landlord will expect a tenant to give vacant possession when the lease comes to an end.
What is vacant possession in practice? Is it a people-free zone?
In practice, a property must be absent of any people on the day of completion to be classed as giving vacant possession. This means the property must not only be free from anyone with the legal right to occupy the property under any lease, sub-lease or licence – it extends to the physical occupation of the property. This includes any workmen, cleaners or employees of the vendor, landlord or previous occupier.
In some cases, the previous occupier may remain in the property. This may be where they have a contractual or statutory right to do so, or because they are trespassing. Nonetheless, any lawful or unlawful occupier is likely to negate vacant possession, particularly where it would not be difficult for the vendor or landlord to take steps to obtain a court order for possession.
What is vacant possession in practice? Is it a chattel-free zone?
Vacant possession not only requires the property to be free of any previous occupier, it also requires the physical removal of goods.
As such, the property must be empty of all chattels, ie; any moveable objects not included in the terms of sale or grant of any lease. This includes items such as furniture, pictures, boxes and even rubbish. The presence of removable items will be construed as a right of the previous owner or occupier to continue to use the property for their own purposes, ie; as a place of storage.
The test for physical vacant possession is whether the chattels left behind substantially prevent or interfere with the enjoyment of the right of possession of a substantial part of the property. A small amount of property that is not a substantial impediment to the enjoyment of the property for its intended use may not amount to a failure to give vacant possession.
What is vacant possession in practice? Is it a legal-impediment free zone?
An empty building free of people and chattels does not necessarily mean that a property can be sold or leased with vacant possession. The obligation to give vacant possession is not simply about moving out all people and physical items by a particular date. The property must not only be empty, it must also be free from any outstanding legal claims.
Examples of where a vendor or landlord may not be in a position to give vacant possession by reason of a legal impediment could include:
- where the sale of land is dedicated as a public highway, providing the highway authority with an existing right to possession.
- where the historic surrender of a lease is deemed void by reason of the tenant being insolvent, the purported surrender being classed as a disposition of property by a bankrupt.
- where the use of an entire leasehold property is restricted by statute to one household, preventing vacant possession following the sale of a ground floor flat with an existing first floor tenancy.
These rather unusual examples, based on actual case law, demonstrate why legal impediments are all too often overlooked. Any legal claims, no matter how obscure, could present a barrier to vacant possession on completion of a contract or grant of a lease.
When does vacant possession have to be given?
Both residential and commercial property can be sold with or without vacant possession. Typically, where vacant possession is to be given it will appear as an express term of the sale. It may also, however, be implied by law.
In circumstances where a property is not sold ‘subject to an existing tenancy’, there is often a presumption that the purchaser will obtain vacant possession. The requirement to give vacant possession usually arises in the following circumstances:
- when property is sold or leased
- when a tenant vacates at the end of the lease term
- when a tenant breaks a lease early, in which case vacant possession may be a condition of the break.
How to give vacant possession
Examining the question of ‘what is vacant possession?’ can assist in understanding the obligation to meet this requirement.
The obligation to provide vacant possession is the legal commitment to ensure that the property is fit for occupation, both physically and legally, on the date agreed for the new occupant to take possession. On this date the purchaser or tenant must be able to take immediate physical possession.
As a vendor or landlord in meeting the requirement for vacant possession you will need to ensure the following:
- there are no legal impediments to providing vacant possession
- no one retains the legal right to occupy the property
- the property is free of any people
- the property is free of any chattels, save except those agreed
- the property is free from any rubbish
- that you hand over all sets of keys.
It is important to understand ‘what is vacant possession?’ to ascertain whether there has been any breach of the obligation to provide this.
In circumstances where a property is not entirely free from people, chattels and any legal claims, this may or may not constitute a breach of the obligation to provide vacant possession. Every situation turns upon its own particular facts.
In any event, any alleged breach can in itself result in protracted, complicated and costly legal proceedings for all involved. Where a vendor or landlord has failed to give vacant possession, a purchaser may seek specific performance, damages and/or elect to rescind the contract. A landlord may also seek damages against a tenant failing to give vacant possession.
Should legal advice be sought?
The law relating to vacant possession can be highly complex. Moreover, the financial and practical consequences of failing to provide vacant possession can be significant for all those involved.
In the event that you are under an obligation to provide vacant possession and have failed to do so or, alternatively, you wish to make a claim for breach of this obligation, you should seek expert legal advice.
Your legal advisor can assist you with any questions you may have about your property transaction, including the question of ‘what is vacant possession?’.