Prior to the appointment of Liz Truss as the new prime minister, there was much discussion over what fixtures and fittings the outgoing prime minister would be able to remove from the Downing Street flat when vacating.
So, what are the general principles when it comes to fixtures and fittings (or chattels) for tenants under commercial leases in England and Wales?
To begin with, a fitting or chattel is something that is not a fixture, desks and chairs in an office would be obvious examples, but perhaps not so obvious, are floor coverings, which are also generally treated as tenant's chattels. In addition, machinery in an industrial setting could also be chattels. For example, case law has determined that a regulator weighing 50 tonnes and two transformers each weighing 100 tonnes and a crane which could be removed intact and ran freely on rails, were all chattels.
The difference between a chattel and a fixture is determined by the facts. The key questions to consider are the degree and purpose of the annexation.
Degree of Annexation
The degree of annexation test considers:
- whether the object is fixed to the property and if so,
- to what extent.
Case law suggests that if an object is fixed to the property (other than by its own weight) then there is a rebuttable presumption that the object will be a fixture, not a fitting. The greater the degree of fixation, the stronger this presumption will be. When applying this test in practice, it can be helpful to consider whether removing the object will cause damage to the property. If the answer is yes, the object is more likely to be considered a fixture.
Purpose of Annexation
This test considers why the object was fixed to the property in the first place. If the object was fixed to improve the land, then it will likely be a fixture. Otherwise, if the object was fixed to the property for the mere enjoyment of the object itself, then it is more likely to be a fitting. In the context of trade equipment being fixed to enable it to be operated, the trade equipment will be treated as a fixture.
Tenant's or Landlord's Fixture?
Having looked generally at what constitutes fixtures, you then need to consider what constitutes Tenant's Fixtures under a commercial lease. A Tenant's fixture has been attached to the land by the tenant (or a predecessor under the lease) to be used for its business. In addition, it needs to be capable of being removed without itself being damaged beyond repair preventing it from being used once removed or from materially damaging the land from which it has been removed.
For example, in an industrial context, the fact a fixture is large, difficult, and costly to remove and may require specialist planning and contractors to remove, does not necessarily prevent it from being a tenant's fixture capable of removal. Nor does the fact the landlord may have placed an obligation on the tenant to install certain fixtures, prevent them from being tenant's removable fixtures.
Why is it important to distinguish between tenant's fixtures and chattels and those that may belong to the landlord or form part of the land?
The starting point, if the lease is silent, is that tenants are allowed to remove their chattels, for example desks and chairs (under an office lease) and provided they do so before the end of the term any tenant's removable fixtures. Any tenant's fixtures not removed before the end of the term will become landlord's fixtures.
It is common practice in leases, to place specific obligations on tenants to remove fixtures and fittings at the end of a term and to place express obligations on tenants to remove fitouts and replace carpets and in some cases, to specifically leave items at the property.
Where a trade fixture to be used by a tenant, is particularly large, or needs to be fixed in place to be operated, or would be difficult to remove, which may lead to questions as to whether it is a tenant's removeable fixture, addressing any expectations and creating contractual obligations at the outset over what the tenant expects to remove, or even what they may wish to agree is not removed can avoid disputes that may occur at the end of the term, for example:
- over whether vacant possession has been granted when exercising a break clause; and
- over terminal dilapidations, when assessing whether the property has been left in the state of repair required by the lease at the end of the term.
If you have questions regarding fixtures and fittings and how these are to be dealt with under your lease, please do not hesitate to get in touch with our Real Estate team or your usual Brodies' contact and look out for further information on how fixtures and fittings are dealt with in Scotland.