What Is the Difference Between Chattels and Fixtures?
Heard about chattels or fixtures? They are crucial to understanding what property passes in leases and sales contracts. Read this article to find out more.
Have you ever heard the terms fixtures and chattels? These terms help to separate personal property from real estate property. They are commonly used in the context of selling and leasing real property. In this article, we will explain what each of these terms mean and why knowing them matters.
The first rule for defining property as a fixture is to ask whether the property attaches itself to the land or building? For example, John owns a restaurant. In this restaurant, John fixes a refrigeration system into the building for the commercial storage of food. John then installs a bathroom. Both the refrigeration system and the bathroom are fixtures. They are fixed to the restaurant and cannot be removed without causing damage to the property. Common examples of fixtures are:
- Bench tops;
- Ventilation systems;
The second rule for defining property as a fixture is to ask why did the owner install it? This is known as the purpose rule. Returning to our scenario, John intends for the refrigeration system and bathroom to serve the purpose of running a restaurant. You cannot run a restaurant without a refrigeration system or bathroom. When John sells the restaurant, both are to remain, as selling the business does not mean closing the business. If the intention is for the property to remain with the land or building, then the property is a fixture.
A chattel is a form of personal property. It is movable and belongs to the person rather than to the land or building. In returning to our scenario, John decides to be lazy and purchases a microwave to cook his customer’s food. To cut and prepare the food, John buys an expensive blender. Both the microwave and the blender are chattels. They can be easily disconnected from their sockets and are transportable. Common examples of chattels are:
- Removable machinery in a newspaper press;
- Disassemblable furniture;
- Hanging pictures;
Just like with fixtures, whether the property is a chattel depends on its purpose. When John bought the microwave and blender, his intention was for these appliances to help him with preparing food for his customers. They were not meant to remain with the restaurant. Therefore, they are John’s personal property and when he sells his business, they go with him.
Why is it important to know the difference between chattels and fixtures?
When signing a lease for commercial purposes, purchasing a house or selling a professional practice, it is essential you know the difference. All fixtures remain with the property. Therefore, when you enter into a lease or purchase property, any property that is a fixture passes to you for the lease period or indefinitely. Likewise, if you sell a property or lease out land or buildings, property that are fixtures passes to the lessee for the lease period or to the buyer indefinitely.
On the other hand, chattels do not pass. As chattels are personal property, ownership does not change when real property is leased out or sold. Most of the time, distinguishing between chattels and fixtures is not difficult.
However, sometimes there can be heated debate between parties about a particular piece of property. For example, one popular case involved deciding whether bolted down chairs in a theatre were chattels or fixtures. The Court ruled that they were chattels, despite being fixed into the floor. When installing the chairs the owner’s intention was not for the chairs to remain permanently with the theatre, therefore, the chairs are chattels rather than fixtures.
Knowing the difference between a chattel and fixture is important when leasing, buying or selling property. You should seek legal advice, so as to be certain which property are chattels and which are fixtures.
Want to know more? Contact a LawPath consultant on 1800 529 728 to learn more about property forms and to obtain a fixed-fee quote from Australia’s largest legal marketplace.
Vincent is a Legal Tech Intern at Lawpath as part of the Content Team. He is in the second year of his Juris Doctor law degree at Macquarie University. He is interested in both International Commercial Law and Criminal Law.