Items inside a property can be either fixtures or chattels. If something is a fixture then (legally) it forms part of the property. If it is a chattel then it remains legally separate from the property.
If something forms part of the property then any dealing with the property (such as a sale) includes the fixture. If something is a chattel and therefore does not form part of the property, then it is not automatically included in any dealing with the property and so must be dealt with expressly in the transaction documents.
Whether something is a fixture or a chattel is a question of fact in each case. It cannot be said that a particular object will always be a fixture or a chattel. In deciding what an object is the courts ask:
What is the method and degree of annexation of the object to the property (i.e. how is the object attached to the property and how strongly is it attached)?
What is the purpose of the object being attached to the property (i.e. why has the object been put there)?
The recent case of Borwick Development Solutions Ltd v Clear Water Fisheries Ltd (2019) shows how issues regarding this point can arise.
In that case the seller sold land to the buyer. On the land were 40 solar panels. They were affixed to a metal frame which, in turn, was screwed into a wooden frame set in concrete. The sale documents (contract etc) did not mention the solar panels. There was therefore a dispute as to whether the buyer or seller owned them from completion of the sale.
The buyer argued that the solar panels were fixtures so that when he bought the land he obtained ownership of the solar panels automatically. The seller argued that the solar panels were chattels so did not pass automatically and that, therefore, he seller still owned them.
The High Court decided that the solar panels were fixtures and therefore when the land was sold, the buyer automatically owned the solar panels as well. This was because:
the solar panels were deeply embedded in the ground with concrete and bolts so the degree of attachment of the panels to the property was very significant. As such there was no easy way to separate the panels from the property;
removal of the panels would involve very substantial work and significant damage to the surface of the property;
the purpose of installing the solar panel units was to generate electricity for use on the property itself, in particular to power a restaurant that had been built on the land; and
the seller’s intentions as to the use or purpose of the solar panels was irrelevant.
When selling property it is important that the seller and buyer agree what objects inside (if a building), or on (if land), a property are being sold. These discussions may result in an increase or decrease in the purchase price and should also clarify potential issues at an early stage which avoids delays and expensive litigation. It is also important to ensure that objects on the land are listed in the contract and explicitly included or excluded from the sale.
This is particularly important when a property is being sold with ‘vacant possession’. Vacant possession means that a seller needs to ensure that there is nothing in or on the property which could disrupt the buyer’s immediate use of it following completion.
If an item is deemed to be a chattel, but the seller mistakenly believes it to be a fixture and therefore part of the property so does not remove it from the property before completion, the seller will be liable to the buyer in compensation for the inconvenience caused to the buyer. Similarly, if an item is deemed to be a fixture but the buyer mistakenly believes it to be a chattel and therefore (incorrectly) assumes the seller will remove it prior to completion, the buyer will need to incur the cost of its removal or relocation.
This case is also relevant to landlords and tenants because if a tenant attaches something to the landlord’s building, the tenant may (possibly inadvertently) lose ownership of that item. The tenant and landlord should therefore determine what is intended to belong to each of them before the lease is signed.
Short Richardson & Forth can assist in sales, purchases, leases and other property matters. If you have a query please contact Chris Morgan on 0191 211 1515 or at email@example.com.