Real Estate Fixtures

The typical fact pattern arises when a tenant during the course of his tenancy adds various items to the leased premises. Do these items belong to the tenant or to the landlord? Can the tenant remove these items when the lease is terminated?

The first question is whether the item is a fixture. Second, assuming an item is a fixture, at issue is whether it qualifies as a trade fixture. The law for determining if an item is a fixture is codified in Cal. Civ. Code § 660. “A thing is deemed to be affixed to land when it is attached to it by roots . . . or imbedded in it . . . ; or permanently resting upon it as in the case of buildings . . .; or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts, or screws . . . . “ However, in analyzing whether or not a given item is a fixture, California courts do not rely exclusively on the characterization set forth in § 660. Rather, the courts look a number of factors, most importantly intent.

Once property is characterized as a fixture it ceases to be personal property and becomes part of the landlord’s property: “When a person affixes his property to the land of another, without an agreement permitting him to remove it, the thing affixed, except as otherwise provided in this chapter, belongs to the owner of the land, unless . . . the [tenant] elects to exercise the right of removal provided for in Section 1013.5 of this chapter.”

Large commercial tenants can spend hundreds of thousands of dollars on their leased space on the expectation that they own such “improvements.” Similarly, landlords can often legitimately receive the ownership and long term benefits of a tenant’s capital investments without spending any money. The determination of whether an item is a fixture can have significant financial impact.