Is it a fixture?

Does it stay or can it go? What’s the difference?

It’s an hour before settlement. The matter has gone swimmingly. There’s just the settlement to go and soon the file can be consigned to the “storage” pile. What can go wrong? Silly question really. A lot can go wrong but frustratingly one of the most common causes of a delay in settlement is the final inspection where the purchaser is upset that an item or feature that they had particularly wanted and had assumed would be included has been removed.

The first thing the conveyancer does of course is to rush to the contract to check the list of inclusions (and exclusions) on the front page only to find that the item is not mentioned. Representations are made to the Vendor’s conveyancer. The Vendor says it was never their intention to leave it and from there the argument usually revolves around the marketing campaign, and predominantly, whether or not the item is (was?) a fixture or chattel.

Chattels are the items belonging to the Vendor that can be easily moved, such as furniture or household appliances and are considered to be personal property. If they are not marked as an inclusion in the sale, the Vendor is entitled to remove them when he vacates the property.

A fixture on the other hand is something that is attached to the land in such a way that it becomes part of the land. Therefore, when land is sold, the title to the land will also include all fixtures. Often, deciding if an item is a fixture or a chattel, will depend on:

  • The degree of annexation
  • The intention at the time the item was fixed to the building (or land)
  • The nature of the item; and
  • The purpose of the annexation.

Generally speaking, if the item can be easily moved without causing too much damage to the land or building to which it is affixed, then an argument can be made that it is a chattel. However, if removal of the property will cause damage, then it can be argued that it is a fixture.

In Re May Bros Ltd (1929) SASR 508, Murray CJ said:
“If an article is embedded in the soil or is attached to any building or permanent erection thereon by cement, mortar, solder, bolts, screws, nails, spikes or other permanent fastening, it is a prima facie a fixture unless it has been agreed between the parties or can be inferred from the circumstances, that it was not to be a fixture.”

However notwithstanding the annexation, a fixture can be deemed to be a chattel takin the reasons for the annexation and the intention of the owner when affixing the chattel. In Australian Provincial Assurance Co Ltd v Coroneo, the Court was asked to determine if the theatre seats bolted to the floor, and attached with one another were fixtures or chattels. The Court decided that the seats were chattels, Jordan CJ held:
“The test of whether a chattel which has been to some extent fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period… or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose…”

In Palumberi v Palumberi (1986) NSW ConvR 55-287 two brothers agreed that one brother would sell to the other his interest in property comprising two self-contained flats which they held as tenants in common. There was no discussion regarding inclusions and the selling brother stripped the flat. The Court held the stove and carpet to be fixtures but all the other items where chattels. In his judgement Kearney J. cited several cases including Coroneo and formed the following view:

“It would seem from perusal of these and other authorities in the field that there has been a perceptible decline in the comparative importance of the degree or mode of annexation with a tendency to greater emphasis being placed upon the purpose or object of annexation, or, putting it another way, the intention with which the item is placed upon land. The shift has involved a greater reliance upon the individual surrounding circumstances of the case in question as district from any attempt to seek to apply some simple rule or automatic solution.”

Article courtesy of the NSW Conveyancer Magazine

When to do your final inspection

The Contract for Sale provides for the purchaser to carry out a final inspection of the property before settlement. It is crucial that you carry out this inspection as close to settlement as possible and preferably on the day of settlement.

Why? Imagine this scenario

The very excited purchasers organised with the agent to carry out a final inspection of the vacant dwelling, situated quite some distance from where they reside, on the Saturday before settlement. Apart from an overgrown garden and a less than perfectly clean oven they found the property to be in the same condition as it was when they entered into the Contract. The purchasers were happy to proceed to settlement at noon on the Monday. However, on the Sunday night the dwelling burnt to the ground.

Both the purchasers and the agent were totally unaware of the fire until after settlement had occurred. You can imagine the horror for the purchasers when they arrived at the property with their removal van.

The sting in the tail of this story is that the insurance risk of the home passed from the vendor to the purchasers at settlement. Had the purchasers inspected the property on the morning of settlement they would have discovered the charred remains, refused to settle and the vendor would have had the home rebuilt using his insurance. Instead settlement occurred and the purchasers’ insurance cover did not take effect until settlement, after the fire took place. The purchasers now owned a burnt- out home, have no money to rebuild and owe a large amount of money to their bank!

Whilst it may not always be possible to inspect the property on the day of settlement carry out your inspection as close to settlement as possible and on the morning of settlement do a drive- pass to double check that all is in order.

Rest easy with your conveyance! With over 30 years conveyancing experience and having acted in over 25,000 conveyancing transactions Geoffrey Morgan-Smith Legal and Conveyancing offers you peace of mind on your sale or purchase.

Superannuation claims and disputes

After the family home, superannuation is often the greatest source of a person’s wealth. It surprises many that superannuation is not an asset that normally passes to family members under the terms of a will.

Superannuation is dealt with under the terms of the Trust Deed (legal document) that sets up the superannuation fund and the superannuation legislation. It is the trustee of the fund that determines who will receive the superannuation monies upon your death. The options the trustee has includes paying the monies to your nominated beneficiary. The trustee is not bound to do this if your circumstances have changed unless you have a binding death benefit nomination in place. Usually a trustee will pay the superannuation monies to a dependent because favourable taxation consequences flow from such payments. As a last resort, the trustee may pay the monies to the executor to pass under the terms of the will, or if there is no will, upon intestacy.

If you are not satisfied with the trustee’s determination, most funds will allow for an internal review. If the distribution remains disputed then it is referred to the Superannuation Complaints Tribunal for final determination.

If you require assistance, you should contact a Best Practice Lawyer.