One of the most common questions we hear is: “Can you explain to me what is meant by a ‘fixture’”? The follow-up questions focus on variations of: “Can I take it with me” and “Who owns it”? The implicated issues deal with repairs, damage, and insurance. We’ve gone down this path before (see HERE for an example), and thought it would be timely to travel a little farther than we did with our earlier efforts. Fortunately, today, Ruminations will be able to use the recent Missouri Court of Appeals decision in Herron v. Barnard, 390 S.W.3d 901 (2013) (see it HERE) as a road map. Here’s what that case was about
A tenant with a two year (office) lease had the right to make extensive changes to the leased space. By way of example, the tenant, an architectural firm, was allowed to remove partitions, relocate plumbing and other utility lines, and even relocate the entry door. More important for the purpose of today’s blog posting, the lease allowed it to do the following. Install a sink; install cabinetry with a waste receptacle and storage bin; add appliances; and, install kitchenette shelving. That wasn’t all. The tenant also arranged for a custom-made glass door and matching transom, lots of light fixtures and bulbs, a “picture-hanging” mechanism, filing cabinets, and a security system.
The lease ended, in fits and starts, and the landlord barred the tenant from re-entering the leased space to remove those items. We’ll return to the listed items and their respective characteristics next week. First, we’d like to editorialize. Then, we’d like to quote some “law.” That will put us into a good place to apply the law to the facts (always a good practice) and thereby illustrate the various “fixture” concepts we in this business can expect to see. But, not all today. Today, we’re going to focus on the “law” so as to lay the groundwork (put the foundation in place) for next week’s posting when we go down, item by item, light bulbs through transoms, and identify each as a real property fixture or a personal property (trade or business) fixture.
Like many words listed in a dictionary, the word “fixture” has a multiplicity of related, but distinctly different meanings. Some are relevant to the readers who are (and we say with gratitude) attracted by these weekly Ruminations postings. Many of our readers are “fixtures” in the practice of real property law. Other definitions for a “fixture” are even less relevant, such as today’s blog illustrates.
Given that the word fixture has some distinctly different meanings, why don’t those who write the documents that are grist for our respective mills, use the word more carefully in leases, mortgages, and other agreements? Basically, there are two kinds of “fixtures” we in the trade are concerned with: real property fixtures; and personal property fixtures. And, for those whose eyes have long since glazed over from reading too many leases and other agreements, “trade fixtures” or “business fixtures” are types of “personal property fixtures.” Just writing “tenant’s fixtures” doesn’t tell anyone whether you mean a trade (personal property) fixture or a real property fixture – think about a fancy light fixture hanging over a fancy display case, one unneeded for the light it casts.
And, there is no law against including provisions that directly say: who owns the fixture; who has responsibility for it; or whether it stays or goes. It isn’t automatic. For example, there is nothing that bars a lease from saying that, when the lease term ends, the landlord gets to keep the tenant’s rolling display cases (“trade fixtures”). Likewise, there is nothing that bars a lease from saying that the tenant has to remove the inter-floor staircase it installed (a “real property” fixture). Yet, and here’s the promised “editorial,” many leases (and other agreements) use the naked term “fixture,” and even when they do cover “who is responsible, etc.,” those leases seem to be referring to one kind of fixture or the other, but leave it to the parties to argue about which one was meant in each instance. That’s economically rewarding to those who are called to battle in those disputes, but, in almost all cases, the disputes are so, so, avoidable in the first place.
Now, some law. The Missouri court did such a nice job, that we can be quite lazy. We’re just going to “cut and paste” some “law” from its written decision. While the court recites Missouri’s take on the defining characteristics of the two basic types of fixtures (you haven’t forgotten: real property; and personal property?), the law is generally the same nationwide and probably in Canada as well. There may be some difference in the fine points at the edges, so it behooves readers to research applicable local law when trying to address a specific “fixture” question. Our caveat having been cast out, here we go; here are the “quotes” we like best. Unfortunately, the court uses the term “fixture” to mean a “real property fixture,” but our astute readers won’t be confused and the court, remarkably, is quite clear in its exposition.
- A fixture is an article of the nature of personal property [that] has been so annexed to the realty that it is regarded as part of the land and partakes of legal incidents of the freehold and belongs to the person owning the land.
- The elements of a fixture are annexation, adaptability, and intent.
- Each of the elements must be present to some degree, however slight.
In the Missouri court’s own words, “Whether or not an article is a fixture depends upon the facts and circumstances of a particular case.”
[To remind the reader, when the court says “a fixture,” it is really saying, “a real property fixture.” Oh, well!]
- The annexation element refers to the physical attachment of the property to the realty, and where structures are removable with minimal or no damage resulting, the mere fact of annexation does not support a finding that the item was a fixture.
- On the other hand, “[a]nnexation that may be slight and easily displaced does not prevent an article from becoming a fixture when the other elements are found.”
- The adaptation element means that “the characteristics of fitness or suitability for the building or premises in question are implied.”
- In other words, if the premises were designed or built with the view of having the particular item made an integral part of the building, or if the alleged fixture was necessary for the particular use to which the premises are devoted, the element of adaptation is satisfied.
- But, to meet this element, one must prove that the property at issue is “peculiarly adapted to the real property,” and “[a]n item usable at other locations is not peculiarly adapted for use on the land in question.”
- Thus, although a space may be designed for the use of the property in question, unless there is something peculiar or unique about the property itself that requires only that particular item to be used in the space, the element of adaptation is not met.
- The intent element is “of paramount importance, at least in the case of controversies between [a] landlord and tenant, where the controlling question is usually that of whether the intention in annexing the article to the realty was to make it a permanent accession to the land.”
- Intention is to be determined as of the time the articles were annexed and it is the “[i]ntent of the annexor at the time of annexation [that] controls as to whether something is to be considered a fixture.”
- Intent can be determined by the acts and conduct of the annexor, and a court “is not bound by the person’s testimony on this point.”
- When an annexation is made by a tenant and is such that the chattel may be removed without material injury to the realty, there is a presumption that he did not intend to make a permanent annexation to the real estate but intended to reserve to himself the title to the chattel annexed. [Note, “chattel” means an item of personal property.]
- The law looks with favor upon the right of a tenant to remove articles furnished or installed by him for the purpose of his occupancy even though they may ordinarily be termed fixtures.
- In the context of commercial tenancies, “[c]ase law appears to support the view that the extent of the furnishings necessary for the operation of a modern business negates an intention to make any gift to the landlord and that therefore all ordinary store fixtures, including showcases and shelving, business signs, and miscellaneous other appliances installed by (the tenant) may be considered to remain his personal property, ‘unless substantial damage’ would be the result of removal.”
The Three Elements Combined
- In examining the three elements, “[t]he latter two, adaptation and intent, are more important in determining whether a chattel became a fixture than the method by which the chattel is affixed to a freehold.” [Emphasis by Ruminations.]
To conclude today’s posting, “Part 1” of these “fixture” thoughts, we’ll use a word we fear will no longer be in the required study material for the College Board’s SAT examination: “logorrhea.” Yes, “guilty as charged.” So, as part of our defense in the penalty phase, as a mitigating element, Ruminations now leaves the rest of its Ruminating about “fixtures” for next week.