Fixtures and chattels – the right to alter or remove

• United Kingdom

• Real estate dispute resolution
• Real estate litigation

27-06-2013

Peel Land and Property (Ports No 3) Ltd v TS Sheerness Steel Ltd (Chancery Division – 14 June 2013)

A tenant’s right to alter or remove chattels and tenant’s fixtures from leased premises is well known but this case illustrates that it can extend to substantial and ‘permanent’ items. The case revolved around major plant at the Sheerness Steel Works in Kent. The landlord brought a claim seeking a declaration as to the ownership of certain plant within the Works and an order restraining the tenant from selling, disposing of, or otherwise dealing with, the plant during the lease. Various arguments were advanced which centred around the alterations clause and what the tenant could and could not do during the lease and at expiry. There was also a clause which allowed the tenant to remove various items at lease expiry, if they were tenant’s fixtures.

The High Court applied the established legal tests to distinguish chattels from fixtures and to determine which fixtures were removable “tenant’s fixtures” and which were permanent, because the alterations clause only applied to those which were permanent. The issue of removability required the court to make factual findings on (a) the physical extent of the item; (b) whether the item had been installed for the tenant’s trade; (c) whether it could be physically severed and how difficult the severance would be; (d) the effect of severance on both the item and the premises; and (e) whether the severed item retained its essential character and utility. It concluded that the majority of the items were chattels or removable tenant’s fixtures. For example, most of the cranes within the Works were chattels, but the tracks on which they ran were removable tenant’s fixtures because they could be removed without undue difficulty and without damage to themselves. This allowed the tenant to deal with those items as it wished.

The Court confirmed that clear words were needed to override a tenant’s entitlement to remove a tenant’s fixture and it was not sufficiently clear in the context of the lease as a whole that the removal of a tenant’s fixture was intended to fall within the prohibition on alterations to the premises.

Similar disputes often arise as to which works should be valued and which should be ignored in a lease renewal, a valuation for interim rent purposes or a rent review. The issue was raised in the ongoing Humber Oil litigation as to whether various pipes and liquid-handling systems on the oil jetty should be valued for interim rent purposes (Humber Oil Terminals Trustee Limited -v- Associated British Ports [2012] EWHC 1336). In rent reviews arguments are also often raised as there is usually an assumption of vacant possession, which necessarily assumes that the actual tenant has left taking its trade fixtures and fittings.

This decision provides a useful reminder of the relevant legal principles in distinguishing between i) chattels, ii) fixtures which can be removed at lease expiry and not valued and iii) fixtures which remain part of the realty and should be valued at review and lease renewal.