Could Tenant installed fixtures become part of the premises

Date Added 11.12.13

The case considering this point is in Peel Land and Property (Ports no. 3) Ltd –v- TS Sheerness Steel Ltd [2013] EWHC 16.58 (Ch).

In this case the lease provided that the tenant would build a fully equipped steel making plant and rolling mill. The rent review provisions excluded any value attributed to the buildings constructed by the tenant on site. In particular, clause 2 (6) of the lease prohibited the tenant from making any alternations, changes or additions to the premises except in connection with the permitted use.

The tenant wished to remove large parts of the steel making plant. The landlord applied to the Court seeking a declaration that it owned the plant and an Order to restrain the tenant from disposing of it. The tenant claimed that if items of plant were removable, they were tenant’s fixtures or chattels.

The landlord argued the lease obliged the tenant to carry out the works which included the installation of the plant equipment. Therefore, as a matter of commercial reality it was the same as if the landlord had constructed a fully equipped steel making plant and let it to the tenant. The buildings, plant and machinery belonged to the landlord.

The landlord stated that some of the items were not separate fixtures but part of larger fixtures. If a part could not be removed, if it would be damaged by the severance of another part, or would lose its functionality then no part of the larger fixture could be removed.

Lastly, the removal of fixed plant and machinery by the tenant would breach clause 2 (6) of the lease. The intended removal was not in connection with the use of the premises for steel making.

The Court considered whether: –

  1. Any of the disputed items were chattels;
  2. If not chattels then did the items fulfill the criteria of removability;
  3. If the item was otherwise an irremovable tenant’s fixture, did the terms of the lease and in particular clause 2 (6) override the tenant’s right to remove it.

Were any of the items chattels?

The Court in fact considered certain of the items to be chattels. This included an item known as a “regulator” which weighed 50 tons and two transformers each of which weighed 100 tons. Although they were large and heavy items the Court considered that they rested only on their own weight and were therefore not attached to the land.

The Court considered that the fact the items were bulky and awkward and that severance was complex, did not necessarily mean the item could not, as matter of law, be removed by the tenant, as a tenant’s fixture.

Non-removeable fixtures

The Court did hold that a gas fired furnace, consisting of a steel framed brick built structure fixed to the floor with a basement underneath was a non-removable item because it would be substantially destroyed in the process of removal.

Tenant’s removeable fixtures

However the Court considered remaining items could be removed without damage to themselves, without losing their usefulness and without damage to the remainder of the property. Among the items the Court considered filled the definition of removable fixtures was, a furnace weighing 195 tons and associated fixed plant.

The Court did not accept that the lease prevented the tenant’s right of removal. The Court took the view there was a considerable difference between a landlord incurring the cost of constructing and equipping a building and the tenant having to construct and equip a building at its own expense, albeit under the obligation of the landlord.

The obligation to construct the plant did not mean that in law the fixtures were not removable by the tenant or were to be regarded as landlord’s fixtures. On that basis the Court found that the tenant was entitled to remove all items classed as chattels or as removable tenant’s fixtures.

Conclusion

What this case does show is that the Court is willing to consider items of considerable bulk and complexity as chattels or tenant’s fixtures. It should be noted that in respect of some of the larger items of the plant equipment, experts had estimated it would take 12 to 18 months to remove them from site at a likely cost of £3 million to £4 million. The removal would be extremely complicated and would require tenders from specialist contractors. However the Court have shown that this does not mean that the item cannot in law be removed as a tenant’s fixture.

Whilst clearly it is unlikely that in most buildings, items will be found of quite such a size and complexity to remove, it is worth considering when the tenant wishes to remove an item quite how far the Court will go in applying the legal principle, and whether a landlord should resist the removal, particularly if this will detract from the value of the property, or the item is valuable in itself.

One final note of caution in respect of the Judgment is that it has been appealed. The period set for the hearing is between 18 December 2013 and 22 April 2014. As such this area of the law is open to revision. However at the time of writing it is good law.

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