Fixtures Clause in the Agreement of Purchase and Sale
The “Fixtures” clause in the standard form OREA Agreement of Purchase and Sale (2016 version) reads as follows:
5. FIXTURES EXCLUDED:...................................................................................................
Fixtures are part of the real estate. They don’t need to be listed specifically. The default position is that they are included.
This particular clause calls for a list. The few lines that are provided may be sufficient. If not, a separate Schedule should be attached.
While this “is” the clause which deals with fixtures, it is also important to look at the clause #4 which deals with Chattels, since it includes the following statement:
“Unless otherwise stated in this Agreement or any Schedule hereto, Seller agrees to convey all fixtures and chattels included in the Purchase Price free from all liens, encumbrances or claims affecting the said fixtures and chattels.”
So, while it might seem to be an odd place to put it, the Chattels clause deals with fixtures as well. Fixtures are part of the real estate, so they are subject to any mortgages or encumbrances that are registered. Another clause dealing with this same issue is the “title clause”. We will look at that entire clause in greater detail.
The potential difficulty is possible “claims” and whether they include notices and recalls from manufacturers relating to inferior or substandard merchandise. This may not be a representation that you wish to make.
If you are a Seller and you want to take something with you that is a fixture, then please specify it in sufficient detail, so that it will be clear. You don’t want any possible alternative explanations to come forward later. If you want to take the brand new built-in dishwasher with you, and you have one in the kitchen upstairs and one in the kitchen downstairs, make sure that it is clear to everyone who reads the contract which one it would be.
Fixtures and Chattels – The Confusion
What’s the difference between chattels and fixtures? This is crucial information. Unless you know the difference, it is very difficult to know how to fill-in the Form.
So, what do most people do?
If they want to make sure that a fixture is included (for sure), they call it a chattel and mention it as a chattel which is included.
And, if they want to make sure that a chattel is excluded (for sure), they call it a fixture and mention it as a fixture which is excluded.
You will appreciate that over time, calling fixtures “chattels”, and chattels “fixtures”, just blurs the lines and adds to the overall confusion in this area. After a decade of reading misclassifications, just about everyone runs the risk of error.
It’s not that difficult. The term “chattel” is a derivative of “cattle”. If you bought the farm, did you also buy the cows?
Use of Schedules
Consider the following approach in order to eliminate uncertainty:
Schedule C “included”
The following items, whether they be classified as chattels or fixtures are included in the purchase price and shall remain on the premises following completion.
Schedule D “excluded”
The following items, whether they be classified as chattels or fixtures are excluded in the purchase price and shall not remain on the premises following completion.
This type of approach commonly used in commercial transactions, in my view, eliminates the misclassification of fixtures and chattels.
Brian Madigan LL.B., Broker