One of the areas in real estate transactions that cause quite a few disagreements between buyers and sellers is the concept of what is a fixture that goes with the real estate, vs. personal property that the sellers may remove and take with them. Many Realtor® and most lay people involved with the sale of real estate understand (or think that they do) things like refrigerators and stoves and other items that are obviously considered to be personal property and not a part of the real estate that is being sold. However, there are lots of things that are not as cut and dried, because they may fall under the legal concept being a fixture in real estate terms.
We recently had a Continuing Education class on this topic at our office that was conducted by Donald Rump, Chief Council for our Capital Title Insurance Agency subsidiary. Real Estate One does a lot of Continuing Ed classes at its branch office to keep its agents up to date on the changing world of real estate. Don is a Vice-President and the chief litigator for Capital Title and has a career in real estate law that spans over 30 years. He’s also an entertaining speaker on what might otherwise be a very dry topic.
All Purchase Agreements have some standard boiler-plate language about the fact that all of the normal stuff that one might expect would go with the house actually does go with the house. We have a fancy term for most of that called appurtenances. WikiPedia defines the term this way - Appurtenances are things that belong to and go with something else, the appurtenance being less significant than what it belongs to. In the case of real estate the appurtenances belong with the realty or property. Fixtures would be considered to be appurtenances; however the devil is in the details of how a fixture is defined. That definition is what Don spent his time on helping us to understand.
How one determines whether something is a fixture and becomes an appurtenance to the real estate is determined by a combination of law from court cases and the facts in each instance. Since not every possible situation has been litigated, the courts have established over time a set of three guidelines or tests that may be applied to try to determine if an item is a fixture prior to having to litigate the matter. Don went over the three tests that courts would use and apply to determine whether an item is a fixture or not.
The three tests are:
Annexation – This is the test that looks at whether or not the item is attached (i.e. it has been annexed onto the real estate). Annexation further breaks down in the Actual or Constructive, with actual annexation covering those cases where the items have been physically added to the property through attachment or securing them to the real estate. If it is screwed, nailed, tacked or glued to the real estate the court would likely find it to be a fixture. Court cases have established under this principal that carpeting in a property is a fixture. In another instance a wall-mounted Flat screen TV might not be considered to be a fixture. Keep reading to find out why. Constructive Annexation most often deals with situations where smaller pieces of land may have been added to a larger piece to create an even larger parcel.
Adaptation – This is the test that looks at whether the item was adapted to become a part of the real estate or perhaps the real estate adapted to accommodate the item. A case in point may be found in the creation of a home theater room, where the room may have been modified to fit the home theater projection equipment and the equipment integrated into the room design. Court cases in foreclosure disputes have found that the equipment becomes fixtures within that room and property. If you had to modify the property to accommodate the items it most likely is now a fixture. But keep reading to see why your wall-mounted flat screen is still not a fixture.
Intention – This is perhaps the difficult one for home sellers to understand. It concerns the intention of the homeowner at the time the item was added to the property, not when the owner decides to become a seller and tried to take the item with him. The court will try to decide if it was the intention of the owner that the items be integrated into the property at the time it was added.
So, you can’t just walk away with your home theater equipment and leave a big empty theater room that you built into the house, with everything missing and large holes or spaces where it used to be
The value of understanding these three tests is in not making the mistake of trying to take something out of a property that you are selling that a buyer (and the court) might reasonably believe passes one or more of these tests for whether or not it was a fixture. As a Realtor, It’s my duty to inform seller clients how to avoid getting into a situation that might involve a court having to make a decision based upon those three tests. The best way is to be very detailed and clear about what is staying and what is not in the listing agreement and the MLS advertising.
If I’m a buyer agent on the deal I tell them to put in the Purchase Agreement anything and everything that you believe should come with the property. There may be items on their list that the seller intends to take, but that can be clearly and unambiguously established in the negotiations before the deal is finalized. Make no assumptions. Put everything in writing.
Some of the examples that Don used were from commercial sales and involved things like the tools or equipment that make be part and parcel to the property functioning in its commercial role. One example was a bowling alley that was foreclosed and where the owner removed all of the bowling equipment. The owner claimed that the equipment was separate from the real estate and was his property to take and use elsewhere. The courts said, No, the equipment met the test of annexation, adaptation and intent (it was a bowling alley, after all) and thus that equipment became fixtures.
The classic real estate fixture disagreement is about light fixtures, especially large and special chandeliers. It is an easy one to decide but not a decision that the sellers want to here. A light fixture (hint in the name), even a chandelier is a fixture. It certainly passes the first two tests and even though your intention now might be to take it with you, that was likely not your intention when you installed it. I always advise my listing clients,“If you intend to take it, then take it down (or out) now and replace it, so that a buyer will not see it and make any assumptions about it being a part of the property.”
Another common issue that we hit in the residential real estate business involves things like play structures. The key tests there may be whether the legs or posts of the structure sit atop the ground (think about the metal swing sets that you buy and put together yourself) or have been buried (perhaps even cemented in) the ground and whether things like a maybe a wooden border were added around the structure area with perhaps rubber mulch added to provide safe places to fall off the structure – that’s a fixture. An owner would be hard pressed in court to defend a decision to take that structure when he moved. Utility sheds also come up often and the difference may be between the little plastic shed that you buy at Home Depot and haul home and assemble yourself vs. the shed that you have a concrete pad pored for and then have it built or assembled on that slab. Which do you think passes one of more of the tests for a fixture?
The whole issue of whether something should be considered to be a fixture or not is so dependent on the situation that there is no hard and fast rule, just the tests that the courts have established; and even those are subject to further consideration of the facts of the specific situation. As in all matters that involve legal decisions it is best to consult and attorney if there is doubt. Your Realtor is a good starting point for advice and he/she will suggest that you get legal help if the situation is not clear cut. The three tests that Don outlined provide a good background for you to look at the situation yourself. If you are honest with yourself about those three, you probably won’t have a problem or maybe not create a problem for yourself later. And remember, when in doubt, put it in writing.