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.

Caution travellers

From 1/7/2014 always check your travel agent has insurance to cover you if they go broke!!

It’s no longer compulsory!!

MAIN POINTS ABOUT NATIONAL TRAVEL REFORM – 1/7/2014

From 1st July 2014, a travel agent will be able to take money from customers without needing to have consumer protection insurance, in case the travel agent goes broke. That means any money you give to a travel agent (to book your holiday) who doesn’t have travel agent and intermediary failure insurance (TAIFI), could be lost forever and you wouldn’t get your money back. Plus there is no longer a requirement that the travel agent puts your money into a trust account!

From 1st July 2014 it is not compulsory for travel agents to be accredited. There is a new voluntary accreditation scheme knows as the Australian Federation of Travel Agents (AFTA), Travel Accreditation Scheme (ATAS).

Clearly the vast majority of travel agents are law abiding and wish to continue having the trust of the general public. They will be accredited and leave the consumer insurance. It pays for you to ask for insurance details prior to paying over your hard earned travel money. That includes online travel agents as well.

Buyers beware – know what you are buying

Buyers must carry out a pre-purchase inspection of a property and not rely on the seller having the property in perfect condition ready for sale.

The latin maxim “caveat emptor” or “buyer beware” still remains an essential buyers obligation today as ever. It is up to the buyer to discover through pre-purchase inspections, the current condition of the property. The most common ones are:

  • Pest Inspections to check for past or present termite activity;
  • Building Inspections for major structural defects;
  • Test that all appliances included in the sale are in good working order like the dishwasher, stove, automated garage door and remote, air conditioning and remotes, electric gates and remotes, intercom system;
  • Pool inspection to know the pool filter and pool equipment are in running order and to see that the protective pool fencing complies with the current legislation.

The buyer can carry out these inspections themselves or pay to have professionals do the inspections and provide a comprehensive report.

When is the best time to do these inspections? It depends on the way the property is marketed. If the property is being sold by auction, then before the auction date. If the buyer has a cooling off period, then before the end of the cooling off period.

The purchaser then will still be able to negotiate with the seller on the price or simply decide not to proceed with the purchase and to look for another property.

Remember it’s buyer beware.

Buyers pre settlement final inspections

Over the years I have experienced a number of very unfortunate events that have happened prior to the day of settlement. In one case vandals broke into a home the night before settlement, had a wild party and as they left, set fire to it.

In another instance a water main further up the road behind the property burst putting ankle deep water through the home just the day before settlement. Or how about this!! A vendor’s removal truck ran over the front wall and gates upon leaving the property and took them out.

Buyers need to make sure the property is in the same condition (fair wear and tear excepted) as it was as the date of unconditional exchange of contracts. All inclusions also need to be checked to see they are in working order, e.g automatic garage door, air conditioner, pool filter etc.

More disappointing discoveries on the final inspection would be to find some of the keys to the doors or window locks are not available. The seller hasn’t removed old building materials from under the house (the seller should remove all of their possessions), or a window has been broken.

These are very annoying matters that may or may not be resolved to the buyers satisfaction.

It is crucial that a buyer make immediate contact with their solicitor or conveyancer to report any problems with their final inspection as settlement will occur otherwise, and that problem could become the buyer’s problem.

P.S. A good piece of advice for all buyers is at the time of negotiating the contract price, is to make sure that they are aware of what is staying with the property and what is being taken by the seller. For example, are the matching curtains in the main bedroom with the bedspread included in the sale, or the ride on mower, or the 108cm television bolted onto the wall in the loungeroom included??