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Commercial lease agreements contain many terms and clauses. This might include rent review clauses, break clauses and maintenance terms. As a landlord or tenant, you must understand what is in the lease agreement. Both parties have rights and obligations they should honour; otherwise, they could breach the lease. Hence, this article will explain what you need to know about fixtures and chattels in UK leases, such as when fixtures may be the landlord’s property.
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What is a Commercial Lease?
When business owners require premises to run their business from, they commonly lease property. A commercial lease means the business owner has a sole occupation of the commercial premises for a fixed period. The fixed period is the lease term. In return, they pay their commercial landlord a fixed amount of rent.
A commercial lease agreement between the two parties governs the commercial lease. This is a binding legal contract and will contain all the terms and clauses relevant to the leasing of commercial property. These will detail the landlord’s and tenant’s rights and responsibilities. For example, a commercial lease agreement will contain:
- rental amount;
- lease term;
- repair and maintenance responsibilities;
- health and safety responsibilities; and
- termination rights.
Amongst the terms and conditions of the commercial lease, you will likely come across the terms of fixtures and chattels.
What Are Fixtures and Chattels?
Fixtures and chattels refer to items within the commercial property. However, there are some differences between the two. A fixture is part of the property or the land, so it is permanent. When connected to the property, the fixture becomes part of the property. For example, fixtures would include:
- central heating;
- baths;
- toilets;
- radiators attached to the commercial premises;
- carpet glued to the premises; and
- built-in reception desks in an office.
A chattel, however, is an item in the property which you can easily remove. That is to say, it has an element of independence from the commercial premises. Some examples are
- pictures;
- fridges;
- freestanding furniture such as office desks;
- carpet attached by tacks; and
- stand-alone radiators.
Despite the difference between fixtures and chattels, it can be unclear what property falls into either category. Therefore, it is important you take legal advice. Confusion can lead to court involvement in determining whether an item is a fixture or chattel. Generally speaking, consider the degree of the annexation of the item to the building so how easily or not you can remove it.
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Fixtures and Chattels in UK Lease
Understanding fixtures and chattels in connection with UK commercial leases is crucial. In particular, which items may commonly appear in the following commercial lease areas.
Ownership
Whether an item in a commercial property is a fixture of a chattel can raise legal issues regarding ownership. Where the tenant adds an item to the property during their commercial lease, it is a ‘tenant’s fixture’. This is often for their trade. Even if an item is a ‘tenant’s fixture’ it could become property owned by the landlord. To avoid this, a tenant must remove the fixture during or before the lease ends. Not doing so implies that they have passed ownership rights to the landlord.
Also, if removing the fixture will cause substantial damage to the property, a tenant is not permitted to remove it, and it becomes a landlord fixture. The tenant must remove a tenant’s chattels at the end of the lease term.
If a commercial tenant has an item in a property which becomes attached to such a degree that it may be a permanent part of it, it may then belong to the landlord. Where an item may end up belonging to the landlord, consideration is given to the:
- degree of annexation; and
- reason for annexation where it adds value to the property.
The reason is viewed from an objective perspective rather than a subjective one.
Repairs
Fixtures and chattels can become relevant regarding repair clauses in commercial leases. For example, if a commercial tenant has placed fixtures in the commercial premises during their lease and wishes to take them with them when they leave, they can do so on certain conditions. However, often a fixture can only be removed, providing the tenant makes good damage which arises from doing so. For example, if a tenant places a flat-screen TV on the office wall and it leaves holes when they remove it, they must fix these holes.
Dilapidation Claims
When a commercial lease ends, the commercial tenants may have to ensure the premise is in the state it was when they began their lease. Therefore, if a tenant adds a fixture to the commercial premises, regardless of any value it may add for the landlord, they must remove it, unless the landlord tells them otherwise. If they fail to remove it, the commercial landlord has a right to remove it and charge them.
Key Takeaways
The commercial premises, which a commercial lease concerns, will contain both fixtures and chattels. Fixtures are items annexed to a property to a high degree and have an element of permanence. Chattels, however, can be easily removed and independent from the commercial premise. Therefore, it is important to understand which items are which in a commercial lease. This is because where items are fixtures, there can be repercussions in terms of the lease, such as repair obligations and any potential dilapidation claims. Also, legal ownership issues can arise with fixtures on commercial premises where tenant fixtures can become the landlord’s property.
If you need help understanding fixtures and chattels in commercial leases in the UK, LegalVision’s experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Fixtures and chattels are items within a property. However, fixtures are part of the property and fixed to it, so you cannot quickly move them. Chattels, however, are not fixed, so they can be easily removed and retain independence from the property.
There are many things landlords and tenants need to know about fixtures and chattels in commercial leases. For example, fixtures a tenant adds to the commercial premises can become the landlord’s property in certain circumstances.
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