Monday, July 21, 2008

Ask Erin: So What Exactly is a Fixture?

At the 11th hour of one of my current transactions (I am representing the buyer), the seller made a claim that he wanted to take some backyard items with him. What were the items? One was a free-standing fountain, and the other was a metal-framed arbor (an 8-foot around, gazebo shaped trellis thing is the best way I can describe it). Neither was bolted to the ground. The fountain had a hard-wired electrical connection, and sat on a special pedestal surrounded by shrubbery and stonework that complement it. The arbor sat on a customized brick foundation, and was adhered to the ground by rooted vines that were trained to climb the arbor.

Fixture? Or, not a fixture? My clients and I stood firm that they were fixtures and were to be conveyed with the property...the seller stood firm that the items were personal property and he was going to take them with him.

So I met the listing agent at the property, where he dismissed my claim that the items were fixtures saying - well they are not bolted to the ground so they are not fixtures. Steam shot from both my ears, I'm sure. This listing agent happens to be the owner and broker of record of his firm. So, I went home and grabbed my real estate law text book. Yes, I keep my textbooks.

To cite my reference:
Pivar, William H., and Robert J. Bruss. California Real Estate Law. 5th ed. Vol. 1. Chicago: Dearborn, 2003. 221-223.

Fixtures are former items of personal property that have become affixed to realty so that they are now part of the real property. For example, a household furnace is real property before it is installed in a residence but becomes real property (a fixture) after it is installed. Title to fixtures generally transfers with real property.

There are three basic tests for determining whether or nor an item is a fixture.
1. Intent: This is the most important test. Did the improver intend to make a permanent improvement to the property? If so, it is likely to be a fixture.
2. Method of attachment: Is the item attached in a permanent manner? Bolts, nails, concrete, and pipe generally are considered permanent even though an item can be readily removed. If an item is attached by roots (a tree or plant), it is generally regarded as a fixture. A fixture could be attached by its weight alone. An example would be a building that is not anchored to a foundation. Personal property does not become a fixture when it has been wrongfully attached by a person who is not the owner of the real property and who had no right or permission to make the attachment.
3. Adaptability: Was the item specifically adaptable to the use of the real property? For adaptability, the item need not be custom made; it need only relate reasonably to the use. For example, an argument could be made that a refrigerator placed in a specially built alcove is a fixture, even though its only connection to the real property is a plug in a wall socket.

All three preceding tests need not be met for the courts to determine that an item is a fixture. Civil Code Section 1019 added two additional tests for fixtures.
4. Agreement: Parties are free to agree on whether an item is real or personal property, and their agreement will govern the nature of the property.
5. Relationship of the Parties: When it is not clear if an item is a fixture or personal property, the issue will be determined in favor of
-the tenant, between landlord and tenant
-the buyer, between seller and buyer, and
-the lender, between borrower and lender"

I emailed this passage of text to the listing agent, stating that the fountain is considered a real property fixture per "Test 3 - Adaptability", and the arbor is considered a real property fixture per "Test 2 - Method of Attachment." By the 10am the next morning, he had called to tell me that the seller was going to leave the items. Problem solved.

An item does not have to be bolted to the ground to be deemed as a fixture. If you question whether an item is or is not a fixture, be sure to work this out between buyer and seller before you get too far along into your real estate transaction.

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