What is a fixture?
A fixture is physical property which is permanently affixed, or attached to real property (real estate). Before attachment, it was considered personal property, but once it is permanently attached it becomes real property. Personal property is also known as chattel and is movable.
Why is this important?
It is critical to a buyer and seller, as the buyer is buying the real property. Personal property is the property of the seller and will be taken by the seller when they move. Is a built-in fridge a fixture? Yes. Is a refrigerator that is sitting there and just plugged into the wall? No. This will determine whether or not the refrigerator will automatically convey in the sale, or not.
Could the buyer still request a fridge that is not built-in convey with the sale of the property? Yes, but it is not automatic.
So what exactly determines whether or not something is a fixture?
As this can be a somewhat grey area, there have been many disagreements between buyers and sellers about what is and is not a fixture. In return, the courts will generally apply four tests to determine if the property is or is not. They are:
- The agreement of the parties – the parties must agree on the classification of the property.
- The intention of the parties – If there is no explicit agreement, what was the intent of the parties. Did the seller specifically note in the listing agreement a permanently installed item would not be included (such as a chandelier)?
- Method of attachment – Would it cause significant damage to the property to remove the item? If so, it is generally considered a fixture.
- Adaptation of the item – If the item is custom made for the property it would generally be considered to be a fixture. Such as custom made window shades.
What is a trade fixture and how does it differ?
The term trade fixture applies in a business situation. A trade fixture is a piece of personal property usually installed and used by a tenant. Trade fixtures are considered the personal property of the tenant, and if the landlord sells the building, they are not included in the sale, unless by special agreement.
Think of a jeweler who installs a bunch of glass jewelry display cases in a rented space. The cases are the personal property of the tenant and must be removed before the end of the lease by the tenant. Any damage caused during the removal of the cases must be paid for by the tenant. If the tenant doesn’t remove the jewelry cases before the end of the lease, they become the property of the landlord.
To learn more about trade fixtures read our article about them here.
What else can help me prepare to pass my real estate licensing exam on my first attempt?
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