When a commercial tenant vacates the commercial property that he has been leasing, he can remove all of his personal property and some “trade fixtures” that were located on the the premises. Trade fixtures are removable personal property that a tenant attaches to leased land for business purposes, such as a display counter. For a commercial tenant to be able to remove a trade fixture, the item in question must be:
- Necessary for the business of the tenant,
- Removable without damage to the property, and
- Removed from the property within a proper time.
If a trade fixture does not meet these three requirements, it will become the property of the commercial property owner when the commercial tenant moves out, even if it was installed by the tenant. Trade fixtures in commercial leases are different from fixtures in residential leases, in that commercial tenants sometimes have the right to install and remove trade fixtures.
- What Constitutes a Proper Time to Remove a Trade Fixture?
- What Types of Personal Property Cannot Be Removed by a Commercial Tenant?
- What Are Some Common Categories of Trade Fixtures?
- How Can a Tenant Make Sure His Personal Property Is a Trade Fixture?
- What Happens If a Tenant Removes an Improvement?
- Do I Need a Lawyer Experienced with Commercial Trade Fixtures?
The usual rule is that a commercial tenant is required to remove trade fixtures prior to the termination of the tenancy or within a reasonable time thereafter if the commercial tenant has not had a reasonable opportunity to remove the fixture before the tenancy is terminated. However, keep in mind that exceptions to this rule differ from state to state.
States differentiate on what the differences are between trade fixtures, which are removable, and “improvements”, which are not. Improvements are beneficial changes to leased property made by or for the benefit of the tenant that cannot be easily removed. Examples of improvements range from parking lots and driveways to ice-floors used for ice hockey. If the item sought to be removed by a tenant has become a permanent part of a building or has been specified as an improvement in the lease, then it belongs to the landlord and cannot be removed by a tenant.
- Structures or installations
- Tanks or containers
- Heating, ventilating, or air conditioning facilities
- Categories of equipment such as: Manufacturing / Processing, Retail, Restaurant / Bar, Professional / Banking, Mineral / Agricultural, or Specialty
In creating the paperwork for a commercial lease, the tenant should specify which pieces of machinery or equipment he desires to classify as trade fixtures and include them in the lease document under the proper classification. A tenant should also specify his intention to use the item to aid him in conducting his business or trade on the property.
Generally, if the tenant removes an improvement from the property, he will be liable to the landlord or the owner. The owner may sue the tenant for any cost of replacing the improvement, and any damage resulting from its removal.
An experienced real estate lawyer can assist a tenant or landlord in drafting a lease that will classify which items or property are intended to be trade fixtures and which are meant to be improvements. In addition, if a tenant is unsure whether he can remove an item of personal property, he should consult an attorney before removing it. Since trade fixture and improvement scenarios typically involve pieces of equipment that are very expensive, a mistake in classification may result in a substantial amount of damages to a tenant or landlord.