If you have entered into a residential or commercial property contract of sale of real property or lease, you would likely have come across the terms “fixtures” and “chattels”. These terms both describe concepts of “property” and can often be confused. Certain fixtures or chattels can be defined explicitly in the contract of sale or lease. The terms of the contract, in that case, will be given effect. Often, however, the contract is silent as to what items are included in the terms of the agreement. In that situation, it is essential to understand the difference between the terms.
There are two common law rules for determining whether a property is a fixture:
The degree of annexation:
- The starting point is that generally, a fixture is a physical property that is attached to the land or building. For example, a ceiling fan will generally be installed, or “fixed”, into the building and, therefore, will be a fixture.
- On the other hand, a chattel is moveable personal property that does not belong to the land or building. For example, a free-standing fan that can easily be plugged into and disconnected from an electrical socket would generally be a chattel.
The purpose of annexation:
In determining whether the physical property is a fixture or chattel, it is necessary to consider whether the property has been installed with the intention that the property is to remain with the land or building.
The Court has found that this question should be based on the relevant facts and circumstances and whether a reasonable person would have thought the property was intended as a fixture and chattel.
For example, it would likely be reasonable to assume that kitchen shelves are intended as fixtures in a contract for the purchase of a commercial restaurant.
Sometimes, the distinction between fixture and chattel is debatable.
In one case, the Court held that hanging pictures were chattels despite being easily removable, based on the fact that the pictures were intended to remain a part of the room in which they were hung. Contrastingly, in another case, the Court considered whether tapestries that were securely attached to the walls of a house were fixtures or chattels. On the face of it, they were fixtures because of the degree of attachment. However, the Court held that they were not fixtures because they were only attached to enable them to be used as a chattel (i.e. to be enjoyed in their own right, on display, for enjoyment).
Knowing the difference between a chattel and a fixture ensures that you know what property is included in a contract of sale of real property or lease. As you can see from the discussion above, this distinction can sometimes be unclear. Before entering into a contract of sale of real property of a lease, we recommend that you obtain legal advice to be certain which property is a fixture and which is a chattel.
If need advice, contact our experienced lawyers today on (07) 4052 0700.