Please Sir can I have my fixtures back?!
Do the tenants’ fixtures belong to the tenant at the end of the lease, and can they be removed?
Not necessarily. Tenants’ fixtures, which includes equipment and machinery fixed onto the building, form part of the property while they are in-situ. They therefore, belong to the landlord at the end of the lease term unless during, or at the end of the term, the tenant exercises its right to remove them. However, although a tenant can normally remove its fixtures, the lease can modify or exclude this right. A recent Court of Appeal case has highlighted how important it is to check the provisions of the lease when installing fixtures so that both the landlord and the tenant are clear about who the tenant’s fixtures will belong to.
In 1971, a tenant entered into a 125 year lease of a site on which it agreed to build a fully-equipped steel making plant and rolling mill. The lease contained a covenant by the tenant not to make any alterations or improvements to the premises except in connection with steel making, steel rolling and ancillary operations. Later on, the tenant wished to remove and sell large parts of the steel making plant on the basis that these items were removable tenant’s fixtures or chattels.
The landlord argued that the tenant could not because the removal was not in connection with the use of the premises for steel making. In the lease, the premises were defined as including the building and any landlord’s and tenant’s fixtures within the building from time-to-time. The Court of Appeal confirmed that the prohibition in the lease against alterations to the premises overrode the tenant’s right to remove the fixtures, as they formed part of the premises. Therefore, the tenant was not allowed to remove any fixtures unless the intended removal was in connection with the use of the premises for steel making.
This case highlights the need for the landlord and tenant to consider at the outset what should happen to tenant’s fixtures. If the landlord wants to prevent a tenant from removing tenant’s fixtures (perhaps because a large rent-free period was granted to the tenant in exchange for installing those fixtures) then this needs to be clearly stated in the lease to avoid any doubt.
Likewise, if the tenant wants to be certain that they can remove their fixtures at any point during the term, they need to make sure that the lease does not contain provisions which would prevent them from doing so.We're here to help