This was the first post in an eventual series of five postsin which Brian Madigan, a REALTOR based in Mississauga, ON and fellow Active Rain blogger, discusses in an in-depth, yet easy to understand manner, what can be the complex legal issue of what is considered to be a chattel and how a "chattel" can undergo a conversion to become a fixture...
Chattels and Fixtures ~ The Conversion Process
By Brian Madigan LL.B.
The key concept in the chattel-fixture debate is the process of conversion.
Other than land itself everything that became a fixture started out as a chattel somewhere else. It was brought upon the property and "transformed" in some way into a fixture.
The transformation process in real property law is called "annexation". That is the important legal term. It does not mean that something is affixed in some way by nails, screws, clamps, or glue.
It does not have anything to do with the agreement of purchase and sale. A contract cannot determine its status.
The process of transformation from a chattel to a fixture is something of a metamorphosis. Once complete, the chattel is so affixed to the land that it is part of the real property. This object and the land have become inseparable. The object is now considered to be "annexed to the land" in a legal sense. There is no longer a difference between this object and the land itself, although there once was.
In describing this annexation, the courts have often used the example of a builder A who constructs a building on lands owned by C. He obtained the bricks from B. Upon construction, the bricks became annexed to the lands of C. C owns the lands and the bricks in the building. There is now no difference, the bricks are no longer chattels, they are simply part of the land.
This example occurred sufficiently frequently that most jurisdictions enacted mechanics lien or construction lien legislation to protect those who supplied building materials to a construction site. Otherwise, real property law governed and both A and B lost their rights to C, who may very well have profited at their expense. Their claims rested simply in contract.
Intention counts! In fact, it is the most important ingredient in the test. Has there been a proper conversion? That's the question.
The intention is to be determined objectively. What was the purpose of the attachment or the affixation to the property? Those are both questions simply of a physical nature. Annexation is an abstract conclusion in law, following an assessment of the nature of the attachment.
There are two elements relevant to the intention issue:
1) the degree of attachment,
2) the object or purpose of the attachment.
Once a chattel is attached to the land in some way, and even rather slightly, a presumption arises in law that it has become a fixture. This presumption can be rebutted.
The extent of the attachment strengthens the presumption. So, 20 nails would be better than one in this regard.
Chattels sitting upon the lands, resting only upon their own weight, are presumed to continue to retain their status as chattels.
Those were two basic principles or rules that developed at common law. However, both of these presumptions are rebuttable. In that regard, we come to the second part of the issue of intention. What was the object or the purpose of the attachment to the lands? Really, there are two choices here:
1) the purpose was to enhance the land, or
2) the purpose was for the better use of the chattel as a chattel.
In the first case, the object is a fixture, and in the second case, the object is a chattel. It's as simple as that!
So, the legal principles are rather clear and straightforward. The problem arises only in respect to their application in particular fact situations.
The decisions made by the courts are not always consistent and not enough fact situations have reached the superior courts to have a clear set of binding precedents. In fact, by the end of the 19th century, the English courts had commented that it would be an exercise in futility to attempt to reconcile all the chattel-fixture cases.
While the principles don't change, their application in different circumstances does.
At the outset, it's important to know the rules.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
Chris Smith CSSBB
Chay Realty Inc., Brokerage