AFFIXING THE LEGAL STATUS OF FIXTURES
By: Barry L. Miller, Esq. Offices Orlando.
The question often arises in real estate transaction of whether an item is a fixture that is part of the real property or is it personal property that can be removed upon sale of property. When analyzing the legal status of fixtures it becomes apparent that a distinction need be drawn. Necessarily and legally, property in the State of Florida can only fit into one of two categories, either real property, which is property affixed to land such as houses, condominiums, etc., or personal property, that is to say, property which is not affixed to land, such as cars, boats, jewelry, etc. A fixture is a type of property that falls on the dividing line between real and personal property, a legal grey area.
When selling real property frequent questions arise regarding the status of fixtures within the property, that is to say, will the seller keep the ceiling fans, appliances, doorknobs, etc. or will those particular fixtures transfer with the property to the new owner? The question hinders on the definition of the term fixture.
Firstly, it becomes necessary to define what exactly constitutes a fixture. The term is generally used for a piece of personal property that has been actually or constructively affixed to a structure so that the personal property cannot be removed from the real property without resulting injury to the real property. In essence, a fixture is a piece of personal property or chattel which, when affixed to real property, becomes merged with the real property to which it is affixed. For example, ceiling fans may be considered fixtures as they are personal property merged into, when affixed to, real property. Other examples include: workbenches attached to walls in a garage, garage racks affixed to walls,
The FR/BAR contract itself states as follows:
However, in regards to other fixtures and personal property left within the home that are not explicitly provided for or excluded in the contract, it becomes difficult, at best, to determine the legal status of the property in regards to who owns what subsequent to closing. Between a purchaser and seller of real estate under a valid sales contract, the fixture’s attached to the premises, will vest in the purchaser, after closing, if they have not been removed by the seller prior to closing, and the buyer hasn’t wrongfully prevented the seller from removing such items.
There is a three part test that is generally applied to determine if the property at issue is in fact a fixture. Property will be considered a fixture if it is: 1) annexed or physically connected to the realty, either actually or constructively; 2) adapted or applied to the use or purpose to which that part of the realty to which it is connected is appropriated; which is 3) intended by the party to make the article a permanent accession of the real estate.
What happens to fixtures included in a sale however when they are subject to an interest by a third party? Suppose, for example, that a fixture is being financed by the seller of real property and the buyer purchases the fixture as included in the sales contract without knowledge of the financing arrangement? Suppose further that the financing company then contacts the buyer after the sale and asks for the return of the fixture, who owns it?
Fixtures will have different effects on the relationship of the parties depending on which parties are involved. In general, a good faith purchaser will not be bound by a prior agreement in regards to a fixture. However, if the purchaser does know of the agreement, the purchaser will be bound by that agreement. In regards to our prior example, if the purchaser knew that the fixture was being financed, he would be obligated to return the chattel or assume the financing; however, if the purchaser was ignorant as to the agreement, title to the fixture would vest, by operation of law, in the purchaser and the financing company would be left to seek reimbursement from the seller. However, if the fixture was subject to a UCC line, the purchaser would still be subject to the lien of the lender.
It is important that Buyers insist on receiving a Bill of Sale at closing as required under the FR/BAR contract (Paragraph I.(ii)), whereby the Seller warrants title to the personal property.
Suppose further that a frequently-used lease provision provides that all “improvements to the Real Property being leased by Tenant are the sole property of Landlord.” Who owns the fixtures that are used by the Tenant in the property? For example, is a bar owner entitled to the sinks he installed in the lease premises? Is a carpenter entitled to return of his saws and workbenches affixed directly to the wall of the leased premises? Is an exotic dancing business entitled to return of the poles they installed after their lease terminates? In a landlord/tenant relationship, Florida follows the trade fixtures doctrine. This doctrine states that “trade fixtures” are property placed by a tenant for purposes of his trade, and considered as personality rather than realty, and may be removed by the tenant. So, provided the improvements to the lease premises are used in connection with the tenant’s trade or business, they may be removed by the Tenant.
It is also helpful to note that, in a mortgagee/mortgagor relationship, property that is affixed to the real estate by the owner before obtaining the mortgage is presumed to be a part of the realty and will be included in the mortgage interest and is subject to ownership by the lender in a foreclosure action and removal of those fixtures may expose the property owner to additional incurred liability.
While a fixture is considered part of the reality in some instances, it still remains personal property as to the one who has the right to remove it. If a person is wrongfully denied the right to remove the property they may bring an action (lawsuit) to recover possession thereof. Whether the property is part of the reality or can be separated is considered a question of fact, or a mixed question of law and fact.
The attorneys at Barry L. Miller, P.A. are familiar with all aspects of real estate sales and exchanges, leases and mortgages, and the legal status of fixtures. Contact us today via telephone at 407-423-1700 or via email at [email protected] for a free consultation to determine your legal rights.