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When is a wall not a wall?

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09/05/2014

Introduction

The recent case of Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd [1] (Peel v TS Sheerness) provides a useful reminder on the distinction between fixtures and fittings, a topic which has plagued property owners, lawyers and the judiciary alike for many years. Though this case doesn’t make new law it does provide a helpful summary of the law relating to fixtures and fittings and confirms that the answer to the question posed above is that a wall is not a wall, when it is a stack of stones [2].

The two tests

Whilst a fitting remains personal property, due to its ‘annexation’ to the land, a fixture becomes real property. To complicate matters however some fixtures can be detached at which point they will lose their status as real property and revert to being a fitting. In order to deduce the nature of an item, case law has led to the development of two tests which, whilst they seem simple in theory, are not always easy to utilise. The first test considers the method and degree of annexation to the land, the second the object and purpose of that annexation. Early case law placed a great deal of importance on the first test, which can be summed up by asking firstly whether the item is fixed to the land and if so how firmly, and secondly what damage will be done by its removal. The answers to these questions will provide an indication as to the nature of the items in question. In order to draw a more definitive conclusion however, consideration has to be given to the reason for annexation, by ascertaining whether the intention of annexation was to better enjoy the land, or the item itself.

If an item has been affixed with a view to effecting a permanent improvement to the land then the likelihood is that it is a fixture, particularly if the item cannot be removed without serious damage to, or destruction of, part of the land. This is not to say however that an item that merely rests on the ground anchored by its own weight cannot still be a fixture, if the purpose of it resting where it does is to better enjoy the land, rather than the object itself. If, on the other hand, the annexation to the land is designed to facilitate the enjoyment of the item itself then it will remain a fitting (even where there is a relatively high degree of physical annexation).

Using these tests case law has confirmed that kitchen worktops were fixtures whereas white goods remained fittings, despite the fact that they occupied spaces designed specifically to hold them [3]. Such items were finite in their lifespan and were not installed with a view to being a permanent improvement to the building. On the other hand a worktop and units in a garage were fixtures as both were in place to make the garage a useful area [4].

A third category

It is also possible for a fitting, which has been brought on to land by a tenant and affixed in order that it becomes part of the land, to later be removed. This occurs where the purpose of affixing the fitting was the tenant’s trade or business or where it was affixed as an ornament or for the sake of convenience and the item can be removed without causing substantial damage to the land and also without the item being rendered useless as a result. Such items are called ‘tenant’s fixtures’ and there is some debate as to whether, whilst they are annexed to the land they belong, confusingly, to the landlord with ownership only passing back to the tenant once they are removed. What is clear though is that a tenant’s fixture cannot become part of the structure of a building as it must not lose its utility when removed, it must remain usable even if it has to be taken apart when removed and reassembled at a later date. Regardless of the complexity associated with removal of an object, or its size an item can be a removable tenant’s fixture, provided that it remains (or reverts following reassembly) to its useful status following its relocation.

Once the nature of the items has been addressed, consideration must then be given as to the terms of the lease to ascertain whether it places any bars on removal of tenant’s fixtures. There is nothing, per se, unlawful with the parties to a lease agreeing to modify or exclude in its entirety, a tenant’s right to remove its fixtures but the drafting of any such clauses must be clear and unambiguous. If the drafting of any such provision is unclear then it will not be effective to modify a tenant’s right to remove its fixtures. The High Court in Peel v TS Sheerness had originally found in favour of the tenant on this point, stating that a provision in the lease preventing alterations save where they were in connection with the use of the premises for steel making, rolling or ancillary purposes, did not override the tenant’s ability to remove fixtures. The landlord was given permission to appeal on this point on the basis of its assertion that there was no rule of law that required especially clear words to be used defeat a tenant’s right to remove fixtures. The Court of Appeal agreed with the landlord’s view that in this case the clause was sufficient to override the tenant’s rights and overturned the High Court’s decision. In doing so the court confirmed that while a tenant is, in principle, entitled to remove its fixtures the provisions of a lease can oust that right. Such provisions however must be clearly stated. Where a clause is ambiguous, the court will take into account the policy of law that tenants should generally be permitted to remove their fixtures to encourage commercial investment and in the absence of clarity the courts would be reluctant to interfere with the tenant’s rights.

WM comment

The assessment as to whether an item is a fixture or fitting remains a convoluted process, even in light of this most recent case. Consideration should be given to not only the method and degree of annexation to the land, and the consequences on the item of its removal, but perhaps more importantly the object and purpose of that annexation; was the item installed to improve the enjoyment of the land, or to facilitate the use of the object? The provisions of the lease must then also be considered to ascertain whether clauses dealing with removal and reinstatement are sufficient to defeat a tenant’s right to remove its fixtures. Only once all of these questions have been answered can a conclusion be drawn and a party’s right to remove the item assessed.

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[1] Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd [2014] EWCA Civ 100.
[2] Holland v Hodgson [1872] L.R. 7 C.P 328 in which Blackburn J elucidated the test of annexation with such an example and confirm that blocks of stone formed into a wall would become part of the land and therefore a fixture, whereas the same stones, stored in a builder’s yard and stacked for convenience sake in the form of a wall, would remain fittings.
[3] Botham v TSB [1996] EGCS 149.
[4] Orsman v The Commissioner for Her Majesty’s Revenue & Customs [2012] UKFTT 227 (TC).

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