Commercial Lease Trade Fixture Laws

A trade fixture is something affixed to the lessee’s rented property that they are permitted to take with them after the lease expires.

A trade fixture might be anything from a machine to shelves that must be fastened to the structure. Disputes over trade fixtures in commercial real estate are common when a tenant makes several renovations to a facility, and the lease does not specify who gets to keep certain items.

For example, if a tenant replaces something essential, such as windows, the owner of the property is likely to keep the windows. However, if the tenant replaces a ceiling light with a chandelier, it may be less clear whether the light is something the tenant may take with them or a part of the building.

Industrial equipment, product display counters, and display cases are trade fixture examples. Chandeliers and shelving are examples of trade fixtures. Because trade fixtures are immediately attached to the land, items such as restaurant tables do not qualify. These unattached transportable goods are classified as chattel fixtures under commercial real estate law and are presumed to be the tenant’s property.

The lease’s precise wording may determine the status of some fixtures. Commercial refrigerators, walk-in freezers, and commercial ovens or stoves placed by the building owner, builder, developer, or landlord may be deemed the building owner’s property.

If the tenant installs equipment that was not on the premises before the lease began, the equipment is usually deemed the tenant’s property.

Because many commercial buildings are leased with equipment already in place, and some landlords agree to make specified alterations to the facility before the lease term begins, identifying who owns such equipment at the outset might help to avoid future issues.

The connection of a right or property to a more worthy principal is referred to as appurtenance.

Simply put, appurtenances refer to something that legally belongs to a larger, more valuable organization. It is most typically used in real estate and refers to improvements or privileges that come with a type of property.

It happens when an attachment, such as a heater or air conditioning unit in a house, becomes a part of the property. It cannot be detached from the larger entity once attached or installed.

Appurtenance is usually used for permanent property rights or goods that are conveyed along with the sale of a property. An appurtenance is a type of real property that is immobile or fastened to the land. Appurtenances in this context refer to the land.

In legal transactions, such as the sale or transfer of a property, appurtenances confer ownership of some goods to the person who owns the property. For example, if a renter installs a new water tank in their flat, they may be unable to remove the appurtenance because it is frequently regarded as part of the property as a whole.

This includes in-ground swimming pools, fences, and sheds that are all permanently attached to the land. The phrase is often used to denote the land behind a house. This parcel of land, known as the backyard, is commonly regarded as a part of the property—a house appurtenance.

Appurtenances also include rights to natural resources located on the land, such as water, minerals, or oil, as well as improvements and easements to the property.

What Constitutes a Proper Time to Remove a Trade Fixture?

The typical norm is that a commercial tenant must remove trade fixtures before the tenancy’s termination or within a reasonable time thereafter if the commercial tenant has not had a reasonable opportunity to remove the fixture before the tenancy ends. However, keep in mind that exceptions to this regulation vary by state.

Although certain types of fixtures are usually referred to as “tenant’s fixtures,” they still belong to the landlord until the tenant exercises its right to remove the fixture and severs it.

Tenant’s fixtures are chattels that the tenant (or a predecessor in title under the tenancy) has attached to the land for the purposes of its trade or business and that are physically removable without causing significant damage to the land or losing the chattel’s essential utility as a result of the removal.

The removal of fixtures by tenants can happen during the term but not after it has ended.

Ornamental and domestic fixtures and agricultural fixtures are considered “tenant’s fixtures,” however, removal rights are more limited.

Tenant’s fixtures pass with the land demised in a lease upon lease assignment.

What Types of Personal Property Cannot Be Removed by a Commercial Tenant?

States create limitations on a tenant’s right to remove fixtures by defining the distinction between removable trade fixtures and “improvements.” An attorney can help you understand the distinctions if you have any questions about personal property that cannot be removed by a commercial tenant.

Improvements are advantageous alterations to leased property made by or for the tenant’s benefit that are not easily removed.

Parking lots and driveways to ice floors for ice hockey are examples of improvements.

If the item sought to be removed by a tenant has become a permanent part of the commercial building or has been specified as an improvement in the lease, it is the landlord’s property and cannot be removed by the tenant.

What Are Some Common Categories of Trade Fixtures?

The various categories of trade fixtures include the following:

• Structures or installations
• Buildings
• Tanks/containers
• Signage
• Heating, ventilating, or air conditioning units

Other categories include equipment used in:

1. Manufacturing
2. Processing
3. Retail
4. Restaurants/Bars
5. Banking
6. Agriculture

How Can a Tenant Make Sure Their Personal Property Is a Trade Fixture?

When preparing the documentation for a commercial lease, the tenant should select which pieces of machinery or equipment he wants to designate as trade fixtures and list them in the lease document under the appropriate categorization.

A tenant should additionally indicate how the item will be used to help them perform their business or trade on the property.

What Happens If a Tenant Removes an Improvement?

If a tenant removes an improvement that was made to the property, they will almost always be held liable by the landlord or the property’s owner.

The owner has the right to file a claim for compensation against the tenant for the cost of replacing the improvement as well as any damage caused by the removal of the improvement.

Do I Need a Lawyer Experienced with Commercial Trade Fixtures?

A tenant or landlord can seek the assistance of an experienced real estate attorney when it comes to drafting a lease that will classify which items or pieces of property are meant to be trade fixtures and which are meant to be improvements.

An attorney can help with this process. In addition, a tenant should seek the advice of an attorney before removing any item of personal property from the rental unit if he is uncertain as to whether or not he is permitted to do so.

Due to the fact that the scenarios involving trade fixtures and improvements typically involve pieces of equipment that are very expensive, a mistake in classification may result in a substantial amount of damages being incurred by either the tenant or the landlord.