Property

27 November 2008

Leasing and tenant’s fixtures

In day to day business whether a piece of property (e.g. an air conditioning unit) is a fixture, or considered a loose item, is scarcely even considered. Hostilities often break out however between landlords and tenants when a lease expires as to who owns the item, whether it can be removed, and what needs to be made good around the building it is installed in. In some cases, even who is liable to maintain it, or replace it after it has run its working life. Commonly, but not always, leases deal with these matters and they need to be considered with care.

Goods versus fixtures

The law takes the view that ‘land’ comprises not only the real estate or building, but ‘fixtures’ - in the legal sense - leaving other ‘loose’ property to be considered goods ( sometimes called ‘chattels’) and therefore removable. So, generally once an item is attached to the land it is a fixture owned by the landowner. This isn’t an inflexible rule though because the terms of the lease govern the relationship and can change how the rule applies. If the lease is silent, there is also a limited class of what are called ‘tenant’s fixtures’, purposely installed for the purposes of the tenant’s trade and so weren’t intended to be left behind to benefit the owner. As well as the lease terms the courts have a number of factors they weigh when considering if something is a fixture:

• the degree of annexation to the land (the purpose might be simply to hold something steady, not to make it a fixture)
• whether removal causes substantial damage; if so, a fixture might be the more obvious conclusion, and
• whether the apparent intention was for something to be secured for a long or little time.

Examples

The courts have not always been consistent in their approach, as some examples illustrate:

• carpets, held to the floor in the conventional way by strips of timber containing upward-facing nails to catch and hold the carpet were held by a New Zealand court to be fixtures (!)
• in a building operated by a tenant as a theatre seats fixed by screws or bolts to the floor, wall brackets for lights and electronic transformers fixed on to the floor were held to be in a special class of fixtures - ‘Tenants Fixtures’; underground petrol tanks installed on land used by the tenant in a service station business were considered the same way
• an air conditioning unit (a compressor bolted to the outside wall of the premises and a fan unit above the ceiling not easily removable because it required removing a partitioning wall and dismantling the ceiling, was considered a fixture, and
• a free standing and easily moveable counter and salad bar, first aid box and fire extinguisher in a snack bar takeaway shop were held to be just goods.

Size is not an issue. A transportable prefabricated resting by its own weight on top of concrete piers embedded in the land was considered to be goods, despite connection to sewerage, electricity and telephone services which could be easily disconnected in the event the tenant needed it on another site.

Time for removing tenant’s fixtures

Under the general law the time for removing the tenants’ fixtures is during the term of the lease or while the tenant remains in possession of the premises. Any fixtures left behind after the tenant delivers possession of the premises to the landlord are deemed abandoned.

Agricultural fixtures

The concept of tenant’s fixtures does not extend to fixtures brought onto land for agricultural purposes which are governed by section 155 Property Law Act 1974 (Qld). This section allows a tenant in particular circumstances to remove engines, machinery, fencing, and other fixtures attached to the land by the tenant as well as to remove buildings erected by the tenant on the land.

Conclusion

It is important for a landlord and tenant to agree on the status of items annexed or intended to be fixed to the premises at the commencement of the lease to limit the possibility of disputes arising later down the track. The position should be covered explicitly in the lease as well as including a time-frame for removal of such items. Including a schedule which lists particular landlord’s fixtures and tenant’s fixtures will also provide further clarity.

For further assistance or enquiries please contact:

Stephen Jones on 07 3233 8973.