(Ontario Real Estate Source)
By Brian Madigan LL.B.
The process of converting chattels into fixtures, referred to as “annexation” is a difficult one.
The simple part is straightforward. If it’s attached, it’s a fixture, if it’s not, then it’s still a chattel.
The loose cannon in all of this is the “qualifier”, and that is the “intention” behind the placement. This intention is to be inferred from the circumstances. It is to be obvious to all upon inspection and examination. It is clear, it is evident, it is patent.
So, in that regard the “intention test” is an objective one. A subjective test would require evidence from the particular individual. You would have to call them as a witness and ask them what they intended. That’s not a good test for the law. That is very poor and inefficient. It would lead to conflicting results and a lack of certainty. Hence, the objective test. Whatever the problems might be, it’s better than a subjective test.
Let’s look at the case of some underground oil tanks. They were placed there for stability and ease of access. The tanks were really to be used just as tanks. They were not intended to improve the land. The court said they were chattels, even though attached.
Electric lights are ordinarily fixtures, but the court looking at these ones concluded that they were chattels because they very decorative, unique, expensive, and antiques. They had been attached in place for over 80 years.
Each case is to be determined on its own merits. Usually, the standard rule of thumb would be that electric lights are fixtures. That was the reason here for the court case.
However, you might consider a lighting store. Would all 1,000 lights that are illuminated and on display be fixtures? They weren’t all needed to light the place. They are attached and affixed to the ceiling in the store, but the obvious intention of the store owner would be to offer them for sale to his customers.
The reverse is also true. There are many examples of items which are not physically attached at all, but which are clearly intended to be part of the real estate. The keys to the house, the garage and the storage shed. The combination to the combination lock to open the gate. The tools, appliances, and parts (not attached themselves) which are associated with items that are truly fixtures.
Courts have included as fixtures, items which are part of a set, where the balance of the set are fixtures. In this regard, consider the case of a microwave oven, which is attached only by an electrical cord which plugs into the electrical outlet. Otherwise, it is supported by its own weight. The rest of the appliance set includes a stove, fridge, and dishwasher.
You appreciate that there could be problems in the future determining when the set has been broken, and whether the remaining items still constitute part of a set. It may be easy when a builder constructs a new home and offers the appliances as an included item, but far more difficult when the third homeowner sells the house 11 years later, with some appliances repaired and others replaced. Is there still a set? And, is the new microwave included?
So, you might have fixtures that:
1) are not attached at all, (keys)
2) don’t have a physical existence (combination),
3) are only slightly attached (microwave).
The intention of the attachment is sometimes difficult to determine. It must be inferred from the circumstances, the manner in which it is affixed, the duration or longevity of the means of attachment, and any other physical factors that are evident. Nails, of course would indicate a more permanent attachment than scotch tape. But, what about electrical tape and insulating tape, they are intended to last.
Consider the case of a printing press. When it is in production, it moves, and if it’s not held down in some manner, it can jump around the room. The printer, who rents his facility should not be punished if he clamps the printing press to the floor, or affixes it in some other manner. Most people would conclude that it was not his intention to give the printing press, worth some $70,000.00 to the landlord. That’s also the case with many trade fixtures. They are related to the business being undertaken, and not to the property.
You might also consider various machinery in an assembly plant. If you were to come across 500 items of equipment all bolted to the floor, you may very well have transformed the full set of 500 items into fixtures, whereby the real property is effectively a “production facility”, and the individual items have lost their significance as chattels. So, one must always be careful.
Another interesting case is that of the mobile home. Is it a chattel, or is it a fixture? You will find cases of each side of this question. Let’s consider the mobile home which contains an operating motor and which is driveable. Surely, it does not become part of the real estate simply because it is parked in a mobile park overnight? But, what if it were parked there for 30 years? Is there a point in time when the status might have changed?
You have seen luxury trailers. They are double sized units and two need to be abutted to create one house. They are placed upon the lot by cranes, and have no motors and are not driveable in any way. Clearly, these are the ones that are at risk. How are they attached to the ground, if at all. Some sit on their own wheels, and could be pulled away by a tractor trailer.
But, what about the smaller, older trailer? It is occupied for two or three decades. And, yes, it arrived on wheels as one unit, however, those wheels have deteriorated, disintegrated and the wheel rims have sunk into the sand. What happens then? You may also find that the occupants put up a fence as a skirt around the trailer. That makes it look more permanent in nature. Depending upon whether it looks like it’s there overnight or there forever, courts have made decisions on both sides of this issue.
In order to offer further light on the principles associated with the resolution of the intention-purpose test, the British Columbia Superior Court in Royal Bank vs. Maple Ridge Farmers (1995), stated:
• “First items resting on their own weight or merely plugged in would be chattels
• unless appreciable damage would result from their removal.
• Items otherwise attached would be fixtures.
• When equipment is attached to a structure, all of its components are to be regarded as fixtures,
• even a part that can be removed easily, if the removal of that part would render the machine/fixture inoperative.
• Only in exceptional circumstances would one resort to the purpose test, as in the case of mobile homes or other expensive and large items.”
These principles have been quoted with approval in other cases, but they have probably not been around long enough to be considered “settled law”.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com
