How to Determine the Difference ~ Chattels or Fixtures?
That’s an interesting question when it comes to real estate.
Basically, there’s a process of transformation whereby a chattel becomes so affixed to the property in a legal sense that it is no longer personal property, it is actually part of the land. The process is “annexation”.
So, the ultimate question, of course, is how do we know when it has taken place?
For hundreds of years, Courts have applied real property law to this question. And, this isn’t likely to change anytime soon.
First, it should be apparent for all to see and draw a conclusion. This part of the test is intended to protect the purchaser and any third parties dealing with the land. Essentially, “what you see is what you get”.
Second, we look to the real “intention” of the installer. What did that person think? Were they just trying to steady the personal item? Or, were they trying to improve the land in some way?
Third, we have to determine the “intention” of the installer from an objective viewpoint. We can’t call everyone who ever affixed anything to the land or building and ask them. So, we have to just guess. What do you think a reasonable person who was attending to the installation would have intended? Would they just want to steady or display the personal item, or is this truly intended to be some kind of improvement to the land?
Accordingly, this intention test is to be determined objectively rather than subjectively.
Fourth, we need to disregard stories. We don’t need the real story of how it got there. That’s interesting but not relevant. People like to tell stories and some stories could be quite persuasive, but if we went around and listened to every story about every property, that’s probably all we’d ever do. So, back to basics here. Ignore all the stories and just look at the object. What do you think a reasonable person installing that object would have intended? The story is irrelevant! You have to make up your mind, just be looking at the object. Is it a chattel, or is it a fixture?
The Courts have come up with a couple of extra rules to help out in difficult and challenging situations for “parts” and “sets”.
In respect to parts, if something is an integral component of a fixture, the mere fact that it, in and of itself, may be removable, does not change its character. It remains a fixture too.
If something is one item in a set, and generally the entire set is a fixture, then it too, will also be a fixture.
There are some special rules that will apply to tenancies. The law generally remains the same, however, if a tenant attaches a chattel such that it has become a fixture, it can still be removed under certain conditions. In these situations, the purchaser naturally has knowledge of the presence and occupation by the tenant. So, some things may indeed belong to the tenant, and may be gone by the time the purchaser buys the property and moves in.
The particular fixtures must fall within a particular class. They must be trade fixtures, ornamental fixtures, or fixtures of domestic convenience. They can be removed prior to expiration of the lease term provided that there will not be substantial damage. Also, the tenancy agreement governs the rules related to removal. It could be that the landlord for example provided a tenant’s allowance, thereby, in effect, paying for those chattels which became affixed. Those ones would still stay as fixtures.
Once the lease is over, we are back to the usual standard rules. The purchaser sees what he sees and can draw the appropriate conclusions. There is no need to hear the story about the tenant and how he installed the chattel himself etc, all of that business is irrelevant.
Brian Madigan LL.B., Broker