Difference between fixtures and fittings and chattels in commercial property
If you take a lease over commercial property, it may come with fixtures and fittings belonging to your landlord. Alternatively you might make changes and additions to the property (preferably under a Licence to Alter from your landlord) so that fixtures and fittings are installed. It’s important to know what belongs to you at the end of the lease, so you know what you should take with you, and what are the consequences if you leave anything behind or take anything that you shouldn’t’.
What are the differences between fixtures and fittings (chattels)?
A fixture is deemed to form part of the land or building. A chattel retains its independence and can be removed. Most importantly, a chattel does not pass onto the purchaser when the land or building is sold.
There are two basic tests to distinguish a fixture from a chattel. It is important to consider when an item that a tenant affixes to the landlord’s property becomes a fixture which then belongs to the landlord.
Test one: degree of annexation
This depends upon how firmly an object is fastened or fixed to a property. The greater the degree of annexation or physical connection the more likely an object is to be a fixture.
Test two: removability
How easy is it to remove the object? The easier it is to remove the more likely it is to be a chattel.
As it is often difficult to distinguish clearly between fixtures and chattels, parties involved in property and land sale transactions are advised to seek independent legal advice.
The courts are frequently asked to clarify what are fixtures and fittings and there are numerous cases defining these terms in context. Here are a few examples:
- Central heating
- Block of stones forming a dry-stone wall
- Garden shed
- Block of stones in builders merchant yard
It is important to establish which fixtures belong to a landlord and which belong to the tenant. This distinction has implications for all aspects of landlord and tenant law, including which party is responsible for repairs, lease renewals and in dilapidations claims.
Tenants can remove their fixtures installed for business or ornamental purposes on condition that they make good any damage arising from their removal. So, if you’d put a flat screen TV up on the wall in your office, you are perfectly entitled to take it with you at the end, but if the wall it was on now has holes in it, you must repair those holes before the tenancy comes to an end.
Disputes over whether works of arts are fixtures or chattels are common. The answer depends on the degree of annexation of the item to the building (e.g. if a painting is fixed to the wall and if it can be removed).
A recent case considered whether or not a wooden chalet that a tenant constructed on a piece of land let to them by the landlord, belonged to the tenant once built or the landlord. The court decided that the chalet was so attached to the property as to be a permanent part of it and so now belonged to the landlord. In this case it was a blessing for the tenant that the courts reached this decision as it gave them certain protected tenancy rights.
However, it also raises a general query about what is a tenant’s chattel and what is a fixture and this is relevant to any commercial tenants affixing equipment or building onto property demised to it. Whether or not it is simply a chattel or becomes a fixture (that then belongs to a landlord) is governed by a combination of factors including the following:
- The extent that the item has been affixed to the land
- Why it has been annexed- if you affix it so as to enhance the value of the land and it creates a degree of permanence then it will be a fixture, particularly if it cannot be removed without destroying the item. If its purpose is temporary annexation and just to allow use of the item rather than enhancing the property, then it is likely to be a chattel still.
- For example: are you just bolting it to the property to keep it secure or does it need a more permanent form of attachment that would make it difficult to remove?
- Must note: it is not governed by the subjective intention of the parties, but should be considered objectively.
Recommendations going forward
Tenants should therefore consider this when undertaking work or bringing equipment on to a landlord’s property as to whether or not it is a chattel or a fixture. This will not only effect ownership but also obligations to repair and maintain the fixture and the ability to remove it at the end of the term.
This remains a difficult area of law. If you are a tenant and you want to keep things you have installed, the only way to guarantee they will remain your property when the lease comes to an end is to ensure an agreement with your landlord up front. This can be done by way of a Licence to carry out Alternations, which will clearly set out not only what you are allowed to do, but what happens to any changes or alterations at the end of the lease.
In the case of the landlord, make sure that your rights are protected in the lease. If you do not take these steps, then you may face a despite over the nature of objects that could be both valuable and critical to your business.
When your lease comes to an end, unless you have agreed anything to the contrary, the property must be put back in the condition it was in at the beginning of the lease. So, if you have installed a great air conditioning system or a fantastic new kitchen, you will have to pay to remove it even if you think that it enhances the property and will make it more valuable to let it to the next tenant. If you don’t remove any installed items, the landlord has the right to do the works himself, and to charge you for the cost of doing so. They can also charge you for taking anything that didn’t belong to you. If you were doing the works, you would obviously make sure they were done well, but cost effectively. The landlord doesn’t have to be careful with your money and so it is likely to cost much more if they do the works for you.
Speak to your conveyancer about what you can do if you would like to take things with you when moving out then ensure that the conveyancer is aware of these items. When buying or selling a house it is useful to have an inventory in order to agree from the outset which fixtures, and fittings will be included in the sale. Your conveyancer can help you complete this.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.