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When do fixtures form part of the leased premises?
Property Law News | June 2015
Ownership of a fitout for a business tenant can be confusing at the end of their lease, but some general principles apply
One of the first things to occur when a new lease is signed and the lessee (tenant) is given possession of the premises is the "fitout". This involves adapting what is oftentimes a blank, empty space to suit the various needs and requirements of the business which is about to operate out of the premises. The fitout can include a wide variety of items both "fixed" (e.g. a conveyor belt, piece of heavy machinery or partitions fixed to the walls) and "freestanding" (desks, workstations and cabinets etc.) which can lead to confusion about what can be taken when it comes time to vacate the premises at the end of the lease.
What stays and what goes?
The general common law principle for deciding whether an item is a fixture or a fitting is the intention with which the item was brought on to the land and the degree to which it is "affixed" to the land. While this is generally easy to determine when the landowner (in this case the lessor or landlord) brings an item onto the property, it is not as simple when a tenant does so as a tenant is unlikely to intend to make a gift of the item to the landlord. Confusion may also arise in situations where both the landlord and the tenant are involved in the fitout of the premises.
What are some of the key factors to consider if an item is a fixture?
- Who was responsible for bringing the item onto the property?
- Who has ownership of the item?
- Is the item subject to a registered security interest?
- What was the item placed onto the property to do?
- Is it affixed to the property in such a way that its removal will result in significant damage or injury to the property?
- Can it simply be unbolted, picked up and carried away?
- Was the item intended to remain in position on the property permanently or for an indefinite or substantial period of time?
- Was the intent that the item would only remain in position for some temporary use or purpose?
- Is the particular item part of a larger system that would render the system inoperable if it were removed?
While a large proportion of leases specifically address the removal of a tenant's fixtures and fittings at the termination of the lease and contain "make good" clauses for any damage outside of fair wear and tear which has been caused to the property, it may be prudent for both the tenant and the landlord to clearly identify which of those items installed during the fitout are intended to stay on the premises and which are to go prior to entering into the lease.
Forum Law advises and assists landlords and tenants in all areas of retail and commercial leasing. Call us on (02) 9560 3388 or email us for prompt, friendly and professional advice.
