Landlords, tenants and law students all wrestle over what it means for something to be a fixture as opposed to a chattel. It matters to landlords because, at the end of a tenancy, fixtures can become their property and enhance the land value. It matters to tenants because they risk losing valuable assets installed on the premises as part of their business. It matters to law students because, on their real property exams, they are frequently asked to write intelligently on a legal test that seems straight forward but, in its application, has bedeviled both litigants and courts.
While most commercial leases or property sale agreements contain express terms dealing with this subject, there are occasions where a tenancy ends or a property is sold that brings a fight over what may be removed and what must stay with the land. This generally arises where the written lease or property sale agreement is either ambiguous or silent on the subject or, in some cases, where there is no written agreement at all. The legal test for determining whether an object is a chattel or a fixture is well settled. It was articulated at the turn of the last century in cases such as Stack v. T. Eaton Co. (1902), 4 O.L.R. 335 (Ont. Div Ct.). That test has repeatedly been adopted in British Columbia and is articulated as follows:
- Articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances establish that they were intended to be part of the land.
- Articles affixed to the land even slightly are to be considered part of the land unless the circumstances establish that they were intended to continue as chattels.
- The circumstances necessary to alter this primâ facie character of the objects are the degree of annexation and the object of such annexation, “which are patent to all to see”.
- The intention of the person affixing the object to the soil is material only so far as it can be presumed from the degree and object of the annexation.
More colloquially, the test has been expressed as “whether annexation of equipment was for the better use of the equipment or for the better use of the realty to which the equipment was annexed”: Heathron Developments Ltd. v. Kemp Concrete Products, (1999) 56 B.C.L.R. (3d) 284 (B.C.C.A).