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Tenant was able to remove items it had installed in property, High Court rules

Out-Law News | 20 Jun 2013 | 9:58 am | 2 min. read

A recent High Court decision in which a tenant was entitled to remove large items it had installed on rented premises will provide comfort to developers in the energy and minerals sectors, an expert has said.

Ross McDowall of Pinsent Masons, the law firm behind Out-Law.com, said that the decision was in line with established law, which allowed tenants to remove their own 'chattels' from rented premises even if these had been fixed to the property.

In this case, the operator of the Sheerness steel mill in Kent successfully argued that it was entitled to remove parts of the plant. The landlord had argued that it owned a share of the items as the tenant's lease required it to erect a fully-equipped steel making plant and rolling mill on the site.

"The court found that furnaces, casting machines and cooling towers were tenant's fixtures, so the tenant was allowed to remove them," McDowall said. "That may at first hand seem surprising given the size of the plant and the fact the tenant was under an obligation to install them, but it is in line with established law where if the kit can be dismantled and reused as part of the tenant's trade it won't become the landlord's property."

"This case should therefore provide comfort to tenants who lease land for developers involving large plant and machinery, such as energy-from-waste or mineral processing facilities. However, to seek to avoid costly arguments the lease should explicitly confirm that the plant and equipment installed by the tenant remains their property and can be removed, dismantled and replaced during the lease," he said.

Under English law, whatever is attached to land generally becomes part of the land. The personal property of a tenant remains the property of that tenant as a 'chattel'. If the tenant affixes a chattel to the property, it becomes a 'fixture' and is considered part of the property. However, the law allows some fixtures to be detached from the property, at which point they revert to personal property subject to the terms of the lease. This will generally apply if the tenant is able to remove the fixture without causing substantial damage to the land or to the item.

In its judgment, the High Court said that a provision in a lease which sought to override the tenant's right to remove a fixture must contain "clear words". In addition, a term in the lease which required the tenant to install fixtures did not in itself prevent the tenant from removing the ones it was entitled to. Having reviewed the terms of the lease, the court ruled that some of the items claimed by the tenant could be classed as removable 'tenant's fixtures'.

The judge, Mr Justice Morgan, said that the case was an interesting one as many of the items in dispute were "bulky and complex". Because of this, there were "no obvious illustrations" in the previously-decided case law as to how the established principles should be applied in the specific case, he said.

"[The landlord] submitted that [the lease] prevented [the tenant] from carrying out 'alterations' or 'changes' to the demised premises and that the removal of the tenant's fixtures, particularly the large items of fixed plant in this case, would amount to carrying out such alterations or changes," he said.

"Having reviewed all of the terms of the lease, including [this clause], and recalling the general legal principle that a provision (which is to take away from a tenant the right which the tenant would otherwise have to remove tenant's fixtures) must be expressed in clear terms ... I consider that it is not sufficiently clear from the language [in that clause], read in the context of the lease as a whole, that the removal of a tenant's fixture is an alteration or a change 'in or to the said premises' ... It follows that [the clause] does not regulate the tenant's ability to remove tenant's fixtures," he said.