A 2013 Newfoundland Court of Appeal decision Newfoundland and Labrador Housing Corp. v. Humby sheds more light on the difficult issue of determining whether something is a true “fixture” under a lease, (thereby becoming part of the landlord’s property on installation and not removable), versus a “tenant trade fixture” (affixed to the property but removable by the tenant during or at the end of the term if it is not in default and it repairs the damage caused by the installation/removal).
In Humby, the landlord leased the tenant a piece of property on which the tenant built a pre-fabricated building (about 1500 sq., ft, 14’ high, consisting of a steel frame with metal clad bolted together and to metal brackets set in a concrete footings, fibreglass insulated and designed so that it can be dismantled and moved to another location). There was no welding involved.
On lease termination, the tenant wanted to dismantle and remove the building but the landlord brought an injunction partway through the dismantling and was successful in preventing the removal. The building deteriorated and the tenant sued for damages due to its condition. It lost at trial because the trial judge found the building to be a “fixture” and part of the land on installation, not something that could be removed. His reasons are summarized as follows:
1. It was assembled on a concrete foundation (with a full poured concrete floor) on a concrete footing buried in earth. Concrete is by its nature, when poured in the ground, effectively attached and fixed to the land; its removal results in its destruction.
2. “L” bolts were embedded in the concrete foundation and are permanent. When concrete cures, these “L” bolts cannot be removed in the same manner they were installed.
3. A complete steel structure was assembled upon the structure. The beams, siding and roofing cover were then erected and constructed. Pre-existing, multiple pieces put together (bolted, not welded) in a manner that resulted in a complete unit structure.
4. That composed unit structure, as a final product, cannot be moved or removed in its final form. It is effectively fully annexed to the land.
5. The unit can only be removed by decomposing its parts but it loses the structure by which its permanence as a standing unit came to be composed. Additionally, an integral part of the structure, the foundation and floor, cannot be extracted so as to continue to be available to it. As well, the insulation, vapor barrier and electrical have to be extracted from the component building.
The Tenant appealed.
On appeal the Court examined the general law concerning fixtures Williams & Rhodes Canadian Law of Landlord and Tenant, 1988 which is as follows: “Things which a tenant has fixed to the freehold for the purposes of trade or manufacture may be taken away by him during the term whenever the removal is not contrary to any express or implied stipulation in his lease. But the items must be capable of being removed without causing material injury… or “irreparable damage”… Whether a machine or any other article has been so fixed and attached to the freehold as to become a part of it is a question of fact depending on the circumstances of each case. The primary factors are:
(1) the mode of annexation and the extent to which severance can take place without undue damage to the fabric of the building or to the fixture itself; and
(2) the object and purpose of the annexation, whether it was for a temporary purpose or for the permanent and substantial improvement of the inheritance.
So, we see it is a two part test to determine if an item is a “fixture” and thus part of the property with no right of removal by the tenant, v. a “trade fixture” which can be removed by the tenant subject to the lease.
Most cases address the mode and purpose of attachment of an object to a structure. This case was unusual as it did not involve something being attached to a structure; rather, it was the structure itself.
The Appeal Court likened the building in Humby to a “tent” structure and said: “a tent does not become part of the realty, as it is not permanently attached to the land and because it is the purpose of tents to be set up, taken down and set up elsewhere, as needed.”
The Court said that a building that bolts together and is bolted to metal brackets set in a concrete base is designed so that it can be dismantled and moved to another location and only annexed to the land in a way that it can readily be removed so “it is more like a tent than it is like a permanent building.) As well, the purpose for using such a building is so that when you want to, you can move it.”
So, the Court held that the tenant was legally entitled to remove the building which had now deteriorated and, as a result, it was entitled to damages for the value of building as of the time when the landlord prevented him from removing it.
The Lesson: 1. Determining if an item is a non-removable “fixture” or removable “trade fixture” is often a complex issue; 2. Size and weight are not determinative. 3. The 2 part test of how it was affixed and for what purpose will govern. 4. An item can be looked at as comprising both a fixture and a trade-fixture as in Humby. 5. At the lease inception, turn your mind to what is being installed in the premises and attach a list indicating which items will be viewed as non-removable fixtures and which as removable trade fixtures – this will provide certainty to the parties later.
Disclaimer: This article is for general information purposes only and not intended as or to be relied upon for legal advice. Consult with a lawyer for your unique situation.
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