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Chattels and fixtures

When fixture becomes landlord’s fixture

Heavy bulky objects

Peel Land & Property (Ports No 3) Ltd v TS Sheerness Steel Ltd
[2013] EWHC 1658 (Ch)

Summary

A tenant has a right to remove its fixtures, even though they may be heavy and bulky and removal would be complicated. There is a need for clear wording in the lease if the landlord wishes to restrict the tenant’s ability to do so.

Facts

In 1971 a tenant took a 125-year lease of a site, and under the lease was obliged to build and erect “a fully equipped steel making plant and rolling mill, capable of producing not less than 50,000 tons of steel products per annum”. This the tenant did. In 2012, the steelworks ceased trading and the lease was assigned to the current tenant (T). T wanted to remove large parts of the plant installed by the original tenant. L brought proceedings seeking, inter alia, a declaration as to ownership of this plant.

Decision

As to whether the items were fixtures or chattels, the High Court reviewed a number of cases on the distinction, including Elitestone Ltd v Morris [1997] 1 WLR 687. It held that it is the degree and purpose of annexation that is to be taken into account in order to distinguish a chattel from a fixture. Morgan J stated (at para 69) that the right way to approach the issues in the case was to ask the following questions:
    “(1) are any of the disputed items chattels?

    (2) in relation to the disputed items which are not chattels, do they meet the established requirements as to removability? This second question will involve some or all of the following further questions:

    (3) for the purposes of answering the following questions, what is the physical extent of the item to be considered?

    (4) in relation to the item to be considered, was it installed for the purpose of the trade of the tenant under the leases?

    (5) can the item be physically severed and, if so, with what degree of difficulty?

    (6) what is the effect of severance of the item on the premises which remain and is that effect remediable?

    (7) what is the effect of severance of the item on the item itself and is that effect remediable?

    (8) does the item when severed retain its essential character and utility?

    (9) if the item would otherwise be a removable tenant’s or trade fixture, do the terms of the lease (in particular clause 2(6)) override the tenant’s right of removal?”
The judge held that a number of items brought on to the site by the original tenant were not annexed to the land and so remained tenant’s chattels and were removable by T. These included cranes and transformers that were not attached to the land and had not become part of the structure or fabric of the building.

Looking at the items T sought to remove (other than the chattels) the court found all items, save for one furnace (which, the court held, was too integrated into the building) were tenant’s fixtures and therefore removable. These included a bar mill weighing over 800 tonnes (even though it would leave an undulating floor behind) and a continuous casting machine weighing over 500 tonnes (and even though it was near the end of its useful life and had little commercial value).

L argued that the lease, and in particular the covenant against alterations, prevented T from removing any fixtures (unless in connection with the use of the premises for steel making). The court disagreed. Very clear words would be necessary to restrict a tenant’s rights to remove its fixtures; it was not possible to imply such a restriction simply from the obligation of the tenant to construct the steelworks. The court considered that there was a considerable commercial difference between a landlord letting a fully constructed and equipped building, and a lease that imposed such obligations on the tenant. It could not be said that the clause against alterations could be read, in the context of the lease as a whole, as preventing T from removing its fixtures.

Comment

This case demonstrates nicely that it is not the size and weight of an object that determines whether or not it is a fixture. It is the degree and purpose of annexation that must be considered. As was said in the case, even if the timescale for removal is long, the costs very high and the item old or of little use, if the item is a tenant’s fixture it may be removed. The questions taken from the judgment which are set out above provide a useful way of analysing any similar situation.


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