Battles about Chattels Part 4 of 4
Chattels – The General Rule
Nearly every lease has an express covenant by the tenant to yield up possession at the end of the term. Even if there is no express covenant, there will be an implied obligation to deliver up vacant possession when the lease ends. This means that the tenant must remove all his chattels from the premises.
Fixtures – the general rule
What, however, if the item is not a chattel, but a tenant’s fixture, which the tenant is entitled to remove?
Woodfall 13.148 and Dowding & Reynolds (4th ed.) para 25-41 say that, absent any covenant in the lease, there is no general obligation on a tenant to remove tenant’s fixtures. They refer to Never-Stop Railway (Wembley) Ltd v. British Empire Exhibition (1924) Inc.
Never-Stop Railway (Wembley) Ltd v. British Empire Exhibition (1924) Inc.  Ch. 877
That case concerned the British Empire Exhibition at Wembley, in 1924. The year before, in 1923, the company running the exhibition, BEE entered into an agreement with Never-Stop Transit granting Transit the right to occupy so much land as might be reasonably necessary for the purpose of the construction, erection, equipment and operation of a Never-Stop Railway line in the grounds of the Exhibition. Transit then assigned the benefit of the agreement to Never-Stop Railway, which built a railway line. For about half its length, the line was carried on a viaduct supported by a number of massive concrete pillars. The foundations of these pillars, as well as of the rest of the track, were firmly embedded in the soil. After the exhibition ended, in October 1925, the BEE required Never-Stop to remove the railway and structures it had erected. There was no express provision in the agreement for the removal of the railway, but BEE argued that an obligation was to be implied. Lawrence J held in favour of Never-Stop. He said:
“Mr. Jenkins contended as a proposition of law that, apart from any express or implied agreement, if a freeholder grants to A. a licence to occupy part of his land for a purpose involving the erection on such land of a building for A.’s sole use during the currency of the licence, then, at the termination of the licence, A. is bound not only to remove himself and all his goods and chattels from the land, but also to take down and remove the building which he has erected. No authority in support of any such general proposition was produced; and, in the absence of any such authority, I decline to accept it as sound. In the case of landlord and tenant, it is well settled that, in the absence of an agreement to the contrary, any building erected by the tenant upon the demised land immediately becomes part of the land itself, and at the expiration of the lease reverts to the landlord. In such a case, unless the building has been erected in contravention of some stipulation in the lease, the landlord obviously has no right to compel the tenant to take it down and remove it. The relationship of licensor and licensee which existed here seems to me to present an a fortiori case.”
Although Lawrence J said that the point was “well settled”, in fact there is no other authority on the point. However, the decision seems right in principle. If a tenant installs a fixture and does not breach any covenant in doing so, and has not covenanted to remove it, then it is not surprising if he is entitled to leave it at the end of the term.
Express covenant to remove fixtures
Some leases and licences for alterations contain express covenants requiring the tenant to reinstate the premises and remove fixtures at the end of the term. They are of two types:
- Those that require reinstatement unless the landlord notifies the tenant in writing prior to the expiry of the lease that reinstatement is not required
- Those that require reinstatement only if the landlord serves notice
In the latter case, the service of a schedule of dilapidations requiring reinstatement will suffice: Westminster City Council v HSBC Bank  1 EGLR 62. If the obligation to reinstate arises under a licence, the schedule should refer to the licence. If it does not, the court will have to consider if a reasonable recipient would understand the schedule as referring to the licence. In Westminster City Council v HSBC Bank the court held in favour of the landlord on this issue.
There may also be an implied term that the notice must be served a reasonable time before the lease expires, so as to give the tenant time to carry out the work. However, in those cases where this issue has arisen, the courts have not accepted that implication.
Plummer v Ramsey (1934) 78 SJ 175
Four sub-leases each provided that the subtenant would paint during the last month of the tenancy. Clause 15 provided:
“The lessor may at his option elect that the lessee shall at the expiration or sooner determination of the said tenancy pay to the lessor the sum of … in lieu of painting and decorating the said premises in the last year or at the sooner determination thereof, and upon the lessor notifying the lessee of such election the lessee shall pay to the lessor the said sum of …”.
Branson J held that clause 15 did not specify any length of notice, and notice could be given at any time so long as the tenant’s obligation existed and the tenant was not in breach.
Scottish Mutual Assurance Society Ltd v British Telecommunications plc (Unreported decision of Anthony Butcher QC sitting as a deputy Official Referee on 18 March 1994).
A licence for alterations provided that the tenant “should reinstate the property to its original design and layout at the expiry of the Lease at its own cost should the Lessor reasonably so require.” A notice requiring reinstatement was served only 6 days before the lease expired. The judge held that the correct implication was that the tenant was entitled to a reasonable time after the expiry of the lease to complete the works, and not that the notice was invalid.
Covenant to yield up with vacant possession “tenant’s fixtures excepted” or “other than tenant’s fixtures and fittings”
This sort of covenant could mean either:
- “but the tenant is under no obligation to leave behind tenants fixtures if it wants to remove them”, or
- “but the tenant must remove all tenants fixtures”
Which is right will depend on the language and other provisions of the lease. Dowding & Reynolds: Dilapidations para 25- expresses the view that the second will not normally be the correct construction
Covenant against alterations
The installation of a fixture may constitute a breach of the covenant against alterations. Whether it will do so will depend on the terms of the covenant and the nature of the fixture. Some covenants against alterations allow the tenant to install internal partitions without consent. Further, the installation of trade fixtures will often not constitute a breach of a covenant not to make alterations.
Bickmore v Dimmer  1 Ch 158
There was a covenant in a lease that the tenant would not “make or suffer to be made any alteration to the said premises, except as herein expressly provided, without the consent in writing of the lessors first had and obtained.” The tenant carried on the business of a jeweller and watchmaker. He wanted to fix a large clock on the outside of the wall of the premises. He applied to the landlords for their consent to his doing this; but they refused to give it, and he then fixed the clock without their consent. The clock was about thirty feet above the ground. The clock was lighted at night by electricity. It was four feet in diameter. The clock was fixed to the stone wall of the premises by means of six iron bolts, which were bored into the stone to a depth of six inches. If the clock was taken down, it would be necessary to take out the stones in which the holes were bored and put in new stones. The works of the clock were inside the building, the hands of the clock being connected with them. The Court of Appeal held that the clock was not an “alteration”. It was necessary to interpret the covenant in a sensible way which allowed the tenant to carry on his business. Vaughan Williams and Cozens-Hardly LJJ held that the covenant only applied to alterations which affected the form or structure of the premises. Stirling LJ said that the covenant did not apply to anything fixed to the premises and convenient for the carrying on the business in a reasonable, ordinary, and proper way.
With a lease under seal, there is a 12 year limitation period for bringing a claim for damages for breach of the covenant against alterations. So even if the installation of fixtures is a breach of the covenant, if the landlord’s claim form is issued more than 12 years later, the claim will be time barred.
Covenant to leave in good repair and condition
Shortlands Investment Ltd v Cargill  1 EGLR 51
The lease contained covenants by the tenant to keep the interior of the demised premises and the Landlord’s fixtures thereon properly cleansed and in good and tenantable repair and condition, and to yield up the demised premises with all Landlords’ fixtures and additions thereto wires cables and lighting apparatus and pipes at the determination of the term in such repair and decorative condition as shall be in accordance with the covenants hereinbefore contained. The tenant left various pieces of incomplete or redundant pieces of equipment behind. Judge Bowsher QC said:
Air-conditioning/perimeter heating units: items 48 and 50.
… The defendants removed a heating unit and did not replace it. The only dispute is as to whether the tenant was liable to replace it. The unit is part of a heating system which without that unit is not effective in the room from which the unit was removed. If a tenant removes part of the premises or of the landlord’s fixtures in those premises, the premises or the fixtures are out of repair. The tenants were not permitted by this lease to remove the landlords’ fixture and they were under an express covenant to yield up the premises and the fixtures at the end of the term in good repair. The proviso which entitled the tenants to carry out internal non-structural works cannot sensibly be relied on to excuse the damage which has been done here. These items are proved.
Clips on heating unit: item 119.
This item, costed at £500, requires the removal of clips which the defendants fixed to the heating unit to hold cables installed by the defendants, but removed when the defendants vacated. They therefore serve no purpose at all any more. The defendants say that the clips are in good condition and there is therefore no disrepair. I reject that argument. The heating unit is the landlords’ fixture. Leaving it with the redundant clips affixed to it is not leaving it in a good and tenantable state of repair or condition and there is therefore a breach of the covenants to keep in tenantable repair and condition.
Redundant ventilation ducts: items 122, 127, 136, 141.
These are ducts which the defendants installed to serve equipment, which was also installed by them. The ducts enable the equipment to be ventilated through grilles or vents cut into windows … The defendants removed the equipment, but did not remove the ducts which served the equipment. … I take the view that the plaintiffs are entitled to the full sum of £5,150.
Redundant halon gas fire extinguishers: item 137.
This is a single item costed by both parties at £1,450 which the defendants dispute on the footing that, while it was installed by the defendants as fire-protection equipment ancillary to other equipment which the defendants have removed, the defendants are under no obligation to remove the fire-protection equipment. However, the fire-protection equipment is incomplete and therefore not in good and tenantable condition. The equipment would not be acceptable to an incoming tenant. One should look at this matter more broadly than either party has done. The halon gas fire extinguishers are specialist pieces of equipment in a particular place in the building and there was only a remote possibility that an incoming tenant would want to position equipment in such a place as to find it useful to take over the redundant part of the fire-extinguishing equipment by purchasing those extra parts which would make it usable and placing new equipment under it. The question is not, ‘Was this equipment left in good and tenantable condition?’ (as to which the answer would be, ‘No’, because it was not working) but, ‘Were the premises as a whole delivered up in good and tenantable condition?’ to which the answer would be certainly ‘No’, because the premises were left with some redundant equipment in them which would have to be removed to make the premises usable. There was general agreement on the evidence that the redundant equipment was valuable. Whether its value was greater than the cost of removing it was not established to my satisfaction and the question is, in any event, irrelevant. There was no obligation on the plaintiffs to take on the role of scrap merchants when possession was up to them. I find this head of claim proved.
The Judge’s treatment of the last item is interesting. He said that leaving redundant fixtures which need to be removed to render the premises useable was a breach of the covenant to leave the premises in good and tenantable condition. Dowding & Reynolds para 25-41 argue that this was wrong. They say that the covenant is concerned with whether the premises are defective, and not with what the premises consist of. They suggest that the decision can be justified on a different basis – that leaving only part of a system in place meant that the system as a whole was not left in good and tenantable condition. That is not, however, the basis on which the Judge decided the point.
Wincant Pty Ltd v State of South Australia  69 SASR 126
A 25 year lease of a new office building in Adelaide was granted in 1970 to the Minister of Works, to be used for the South Australian Health Commission. The building was leased with the offices in an open plan condition. The Commission made various alterations to the premises, including installing partitions, altering the layout of the lighting, and building various cupboards. The landlord consented to those alterations and imposed no conditions. The partition fit-out was not symmetrical and was obviously made for the particular purposes of the Commission. The material used for the partitioning was dated. There was limited demand for this type of accommodation in the market at the expiry of the lease, and the parties agreed that unless the partitions and other alterations were removed, the premises would not be in a reasonably lettable condition. They also agreed that the partitions and alterations were tenant’s fixtures.
The majority of the Supreme Court of South Australia (Doyle CJ and Matheson J, Olsson J dissenting), upholding the decision of the District Court judge, held that the tenant was obliged to remove the partitions and other alterations it had made at the end of the lease under clause 17 of the lease which provided:
“17. That the Tenant will at the expiration or other sooner determination of the said term peaceably yield up unto the Landlord all the said premises in good and substantial repair and condition reasonable wear and tear and damage by fire (except fire caused by the Tenant) storm explosion flood lightning earthquake the Queen’s enemies shells or bombs excepted TOGETHER WITH all the appurtenances thereto belonging and all improvements and additions made to the said premises and all Landlord’s fixtures and with the glass in all the windows whole and unbroken and the locks and keys door-fastenings electric light water and other fittings and conveniences thereto belonging in good order and condition and complete in every respect”.
In a powerful dissenting judgment, Olsson J held that, at common law, a tenant was entitled but not obliged to remove fixtures. There was no express obligation to remove fixtures in the lease, and none could be implied. He said:
“First, the Clause also requires the delivery up, in appropriate condition, of “all improvements and additions made to the said premises”, expressions which are wide enough to include tenant’s fixtures remaining on the premises. Secondly, the express reference to landlord’s fixtures does no more than recognise the fact that the tenant has absolutely no right to remove them in any circumstances, whereas it might well, in its discretion, elect to remove some or all of the tenant’s fixtures – in which case it would be incongruous to include an unqualified covenant also to yield up all tenant’s fixtures in good repair.
It is, in any event, a quantum leap to move from a proposition that the tenant may not be under a contractual obligation to maintain tenant’s fixtures, so as to yield them up in good repair if left on the premises, to a situation that there is a term clearly implied in the lease to remove all tenant’s fixtures on yielding up the premises. There is simply no suasive reason for making that leap. By operation of law the tenant’s fixtures had, at time of installation, become portion of the “said premises”, subject only to the common law right of defeasance, if exercised.”
Dowding & Reynolds refer to that decision in para 25-42 and say “it is very doubtful to what extent it would be followed in England” (the 3rd edition was more circumspect: “it is not clear to what extent it would be followed in England”). The dissenting judgment of Olsson J might well be followed by an English court, although Shortlands in relation to the fire extinguishers gives support to the majority approach.
NB: This article is part of a series of four entitled ‘Battles about Chattels’ which addresses issues surrounding fixtures and chattels in dilapidations disputes:
- What are fixtures and chattels?
- Is it a fixture?
- What is a tenant’s obligation if a chattel is let with the building?
- Must a tenant remove tenant’s fixtures?