You’ve just settled the purchase of your dream home and you’re excited about moving in.
Your joy is then dashed when you find that the seller hasn’t left the home with the fittings and inclusions that you inspected.
The cascading water fountain that was in the foyer and constituted an impressive entry statement to the home is gone.
The 30 staghorn ferns that were hanging on all of the outside walls of the house under the verandas, creating a leafy rural amenity to the house, have been removed, eaving gaping holes in the walls.
Or perhaps it was the cubby house (now removed) in the backyard that impressed the kids about their new home, or the now-departed garden shed that was going to be dad’s new tool shed.
Some of these problems might seem like “small beer” on paper, but I can assure you that they become very real and upsetting to you as the new owner of the propert
Investors need to appreciate that even though the issue may be relatively minor in the total scheme of things, disputes about fixtures have at times been taken all the way to the highest courts.
For example, the case of Farley v Hawkins – which involved a dishwasher and a shed – ended up in the Court of Appeal in Queensland, the state’s highest court of appeal.
The case of the disappearing dishwasher
In this case Elizabeth Farley died and, under terms of her will, the children of her first marriage received her house, but her newly-married second husband received the balance of the estate.
The new husband removed a dishwasher from the house and also tried to remove a galvanised iron shed from the property. He maintained that he was entitled to remove the dishwasher and the shed as they were not “fixtures” and therefore did not form part of the improvements to the land.
The dispute was taken to court.
When the original court decision was appealed, the issue was placed in the hands of the Court of Appeal. The final outcome went against the husband, because the court found that the two items were in fact fixtures.
The husband had tried to argue that the dishwasher wasn’t a fixture because it could be easily removed without damage to the dishwasher or the house.
However, the Court of Appeal unanimously held that the dishwasher was a fixture
The court decided that when looking at the other items in the kitchen, such as the benches and the cupboards, these were constructed to incorporate a dishwasher.
The floor where the dishwasher was situated wasn’t tiled and the dishwasher was specifically plumbed into the water inlets and outlets.
Once the dishwasher was removed, it left a glaring and unsightly gap in the kitchen which had been custom-designed to hold that item.
The challenge to the husband’s removal of the shed must have been a lot more painful to him as he contributed to the purchase of the materials for the construction of the shed which was utilised by a company jointly owned by himself and his wife.
It was a substantial structure, and housed earth-moving machinery that was used in the business conducted by the company.
The shed was bolted into substantial concrete blocks buried in the ground.
The police were called to stop the husband removing the shed from the property after it had been dismantled.
The court held that the shed was so substantial that it amounted to a fixture and could not be removed.
The structure was not a type that fabricated for easy transportability and because of the size and relative permanence of the shed, it was a fixture.
The distinction between a fixture and a chattel
In legal terms, the distinction between a “fixture” and a “chattel” is the difference between realty and personalty.
Fixtures become part of the land and therefore the realty, and pass with the sale of the property.
Chattels become personal property and may be taken by the seller following a sale unless the contract of sale provides they are part of the sale and pass to the buyer.
This all sounds very simple and succinct, however it’s much more difficult than this to determine whether certain items have become chattels or are fixtures.
The best guidance is given from the case of Australia Provincial Assurance Co Ltd v Coronoeo.
In the case it was decided that if an item was affixed to a property with the intent to remain in place permanently or for an indefinite or substantial period, the item is a fixture.
If the item was affixed with the intention to remain in place only for some temporary purpose, then it is a chattel. The matter has to be examined objectively in order to determine what the intention of the parties was.
A number of relevant factors are taken into consideration including:
- Whether the item can be removed without substantial damage to itself or the real estate to which it is attached.
- The length of time the item is intended to be attached to the land.
- Whether it is common practise to remove the items on the sale of the property.
Guidance from case law
Various cases have decided that the following items were fixtures:
- A “Queensland-style house” i.e. a wooden house that is resting by its own weight on piles fixed on to the ground.
- An air-conditioning system installed into a three-level commercial building divided into office suites. This system comprised a number of freestanding air-conditioning units, wall-mounted split-system units and a room air-conditioner.
- Galvanised iron tanks resting by their own weight on wooden stands, with the posts being imbedded into the ground.
- A fibreglass house displayed at an exhibition of building materials for one year. The house was attached to the land by steel spikes driven into the ground and welded to steel plates on each of the four steel legs which supported the house. (However, in another case, a pre-fabricated transportable house which sat on the land by its own weight on concrete piers set into the ground and connected to sewerage, electricity and telephone services was not a fixture as the house was moveable without difficulty and without causing any real damage to the land).
The following is a list of items which can in some cases be fixtures and in other cases can be chattels.
The matter can be put beyond and doubt by dealing with these issues In the contract of sale to make it clear one way or another.
However, these are the areas that can be traps for the unwary:
There can be no doubt that a small stand-alone air-conditioning unit is a chattel and the seller has the right to take it on the settlement of a sale of the property.
Larger reverse-cycle air-conditioners, particularly ones that are fitted into walls, aren’t so clear-cut. The contract of sale should therefore explain whether the sale does or doesn’t include such a larger air-conditioning unit.
The average family sound system is easily transportable and can be placed in the boot of a car and taken by the outgoing owner. There’s a different expectation on the buyer’s part, however, with a colour coordinated sound system where the speakers and their wood-grain panels blend into the wooden walls in the lounge room and have been custom-made. If these items are part of the sale then the contract should specifically say so, otherwise they could be removed by the seller at settlement.
Entry statements are the items you see when you walk into a property that give it a ‘wow factor’. This can be items such as a fountain at the front gate or in the foyer of the house. These items appear to be substantial structures, but in most cases can simply be removed by two strong men. Are they are a fixture or are they a chattel? Avoid any fights about them by clarifying this in the contract.
A pontoon might look like a substantial structure, but it’s probably only attached to the wall at the front of the property on the river or the canal by a couple of chains and the walkway. A home handyman can easily tow it away, after removing a few bolts and chains. Once again, this should be specified in the contract so there’s no doubt about whether it’s included in the sale or whether it can be removed by the seller.
Above-ground pools and spas
The fact that these items are often above-ground implies that they’re transportable and can be removed by an outgoing seller.
But would it be reasonable for the buyer to expect that they stay with the property? Of course.
To avoid conflict, provide for it one way or the other in the contract.
Sails providing shade or shelter are often an outdoor feature, particularly for waterfront homes.
A new owner of a property would be very disgruntled to find that these items that featured so strongly in promotional and marketing material for the home have now been taken by the seller.
In most cases they will probably not be fixtures as they’re easily removable from the property. There would be no argument if this was specifically dealt with in the contract.
How do you prove what was included in the sale?
There are a lot of smaller items – for example safes, kreepy krawlies and barracudas, chandeliers, quality curtains and the like – which can be easily removed by a seller or replaced by inferior quality items on settlement of the sale.
How do you prove that the items were there at the time the property was inspected, or that they’ve been swapped for lesser quality items?
A number of my clients who are regular investors deal with this issue by either videoing the inside and the outside of the property at the time of the contract of sale, or by photographing the interior and the exterior of the property with equipment that provides a date stamp.
You could easily be accused of being paranoid if you adopt this approach, but if you’ve been burnt a few times over fixtures then it’s a reasonable approach.
The question of whether an item is a fixture or a chattel is often a difficult question, although some guidance is given by the decisions of Australian courts.
Fortunately the issue can be resolved at the time the contract of sale is entered into.
If you find yourself in one of the grey areas outlined in this article, or where common sense raises a doubt in your mind about whether the item is a fixture or not, simply deal with the matter by including a clause in the contract of sale to put the matter beyond any doubt.
These matters might seem trivial, but they can end up as ‘matters of principle’ with neither side willing to budge.
You may find yourself in a court of law flanked by expensive barristers and solicitors arguing the matter over a couple of days. If you lose, you pay not only your legal costs, but the costs of the other party as well.
If there’s any doubt about a fixture, put a clause in the contract of sale so there can be no argument about it later on.