Key dilapidations issues

The fixtures attached to the property could form part of the property and therefore be within any obligation to repair the property. However, if that were always the case, one could not easily make sense of covenants to repair, say, the property and the landlord’s fixtures. Such wording is not unusual. It would suggest, therefore, that fixtures in situ when the lease is entered into might have some characteristic other than being part of the principal demise. Such distinctions may be relevant if the lease does not demise the whole of the property but only part.

If the item concerned is effectively part of the property, then it will not really be a fixture. If the item is a fixture, a greater problem arises if the tenant has introduced it to the property. Arguments arise as to the standard of condition to which the items should be maintained (is the tenant obliged to repair them at all?), whether they can be removed by the tenant (before or at the end of the lease), what happens if they are damaged during removal or damage is caused to the property during their removal or what happens if the tenant is obliged to remove them and does not.

If the item is a chattel (that is, personal property) belonging to the tenant, there is rarely any issue about the position - it is generally entirely up to the tenant as to what it does with them (see also Creative Foundation v Dreamland Leisure Ltd & Ors - a landlord’s chattel case). However, if the tenant were to leave them at the property at the end of the lease, it could give rise to a damages claim by the landlord for failing to deliver up possession.

If the item is a fixture, then it is treated effectively as being part of the land. But there are some fixtures that a tenant can remove, particularly by the end of the term of the lease. These are known as ‘tenant’s fixtures’. Those fixtures that should not be removed by the tenant are known as ‘landlord’s fixtures’.

It will often be essential to understand the difference between the two categories so as to be able to understand the obligations of the tenant, particularly at the end of the lease.

To do so, one has to consider the manner in which the fixture is attached to the land.

If the item has not been attached to the property, that is a good indication that it remains a chattel. If it has been attached to the property, even to a limited extent, that could be an indication that it has become a fixture. (See Riverside Park Ltd v NHS Property Services – a tenant's chattel/break clause case).

If an item rests on the property by its own weight, it is quite likely to be a chattel, even though it might be quite substantial (such as a shed). Equally, just because it does rest on the ground by its own weight will not always mean that the item is a chattel (such as heavy flagstones forming, say, a patio).

Where an item is attached to the property, one should consider whether it can be removed without doing appreciable damage to the property to which it is attached or to itself. If it cannot be removed without causing such damage, that is an indicator that the item may well be a fixture.

But the extent to which the item is attached to the property is not, of itself, the determining factor in deciding whether or not it is a fixture. One also has to consider the reason it was attached.

If an item is attached for the purpose of achieving some permanent alteration or improvement to the property, it is more likely that it has become a fixture. Generally a domestic washing machine will be attached to the property so as to improve one’s quality of use of the property, but while it is so attached, it is more likely to be removable (although the plumbing to which it is attached might not) without damaging either itself or the property, so would objectively be considered to be a chattel.

Further problems arise when the premises are relet. At the point of the commencement of the new lease, and assuming that it does not say anything to the contrary, the existing fixtures (such as partition arrangements, kitchens or mezzanine floors) become part of the landlord’s demise. The tenant is therefore not entitled to remove them at any time and the landlord may not seek their removal at the end of the new term. This situation occurs even in a renewal between the same parties (whether or not flowing from the provisions of Part II of the Landlord and Tenant Act 1954), where all of the alterations and fixtures of the previous lease simply become the landlord’s in the new lease.

Carpets

Carpets often cause difficulties in the context of dilapidations claims. In many claims, the costs of putting the carpets into repair (which typically means renewing them) can make up a significant proportion of the total value. Disputes often occur over whether the carpets belong to the landlord or are the tenant’s chattels (see TSB Bank plc v Botham and Young v Dalgety above for a more detailed discussion of this).

In the absence of specific direction in the lease, it is necessary to consider the permanency with which the carpets have become annexed to the building. Carpets that are physically glued to the floors are probably fixtures that cannot be readily removed at the end of the term. If so, the tenant may become responsible for repairing or renewing them as demanded by the repair covenants. Conversely, where the carpet is merely held in place by carpet grippers, then it is unlikely to have become annexed and should be treated like other tenant’s chattels.

Most modern offices are now specified with carpet tiles that are affixed with tackifier and are designed to be readily raised and moved about. As such, they are merely chattels. Even if they are provided by the landlord at the outset of the lease, they will not be subject to lease provisions that only refer to the demise. Therefore, unless the lease explains how the landlord’s possessions are to be looked after, the tenant is entitled to do as it wishes with these tiles and could merely remove them at the end of the lease.

Where leases are silent on the presence of carpets, this interpretation may not be representative of the intentions of the parties at the outset of the lease. After all, if a landlord has spent a large sum on providing carpets at the beginning of the lease, it is unlikely to wish to give them away for free. There may be compelling evidence to suggest that it was the intention of the parties to treat the carpets as the landlord’s fixture. For example, see South Essex Partnership University NHS Foundation Trust v Laindon Holdings Ltd [2016] EWCA Civ 377 where a system of tiled carpeting, which had belonged to the landlord was removed and reinstated at the outset of the lease at the tenant's expense. The court held that the new system was a landlord's fixture. One should bear in mind, however, that when the court is considering the interpretation of the lease, it will not generally consider documents and events beyond that. Therefore, even if there is some evidence outside the lease as to what the parties intended in relation to carpets, there is no guarantee that this will be considered by the court.

As a result of these problems, and because many landlords provide property for let with carpets, many modern leases specifically confirm that carpets are part of the tenant’s demise. The effect of this is to confirm that, irrespective of whether the carpets are fixtures or chattels, any lease provision that relates to the demise also relates to these.

The court held that where part of a demised premises is lawfully removed by a tenant, it then becomes a chattel. If it is a chattel of substantial value, then that chattel becomes the property of the landlord.

Removal of fixtures

If an item introduced to the property has become part and parcel of it, then it can never be removed. But if an item has retained its characteristics as a fixture, then if it is a landlord’s fixture it cannot be removed (this includes fixtures introduced by the tenant to replace existing landlord fixtures), whereas if it is a tenant’s fixture it can. Therefore, one only needs to consider whether a fixture is a tenant’s fixture.

To be a tenant’s fixture the item must:

• have been attached to the property by or on behalf of the tenant;
• be a trade, decorative or domestic or agricultural fixture; and
• have been fixed with the intention of removing it when the tenant wished.

In the case of commercial property, one will be concerned mainly with the first category: trade fixtures are items that the tenant has introduced to enable it to carry on its trade or business at the property.

But even if an item is a tenant’s fixture, it may not be capable of removal since the lease may prohibit it.

For a recent detailed discussion of the principles to be applied, see Peel Land and Property (Ports No.3) Ltd v TS Sheerness Steel Ltd.

However, assuming that there is no such limitation, there are other issues to consider in respect of the timing of the removal, since a tenant can only do so during the continuance of the tenancy. (There are some exceptions in the case of others, such as mortgagees of tenant’s fixtures.) Therefore, on forfeiture the right to remove is lost on peaceable re-entry or until judgement for possession (where forfeiture has been by way of proceedings). On surrender, the right to remove will also have been lost, unless the tenant has taken a new tenancy. Where the lease simply expires, whether by effluxion of time or the expiry of a notice to quit (or, it is submitted, a break notice), the right to remove might also be lost.

But the tenant does not have to remove tenant’s fixtures unless the lease (or a licence for alterations) directly or indirectly requires it. However, if a tenant lawfully leaves fixtures at the property at the end of the lease, it could be exposed to a claim for damages if they have not been left in repair.

If the tenant has introduced fixtures when it ought not to have done or has failed to remove fixtures when it should have done, the tenant will be exposed to a claim for damages (in the latter case, for introducing them in the first place). Equally, if the tenant removes fixtures it ought not to have, it will be exposed to a claim in damages. (If the landlord becomes aware of an intention to unlawfully remove fixtures before they have been removed, then it could seek an injunction preventing removal.)

If the tenant has an obligation to remove fixtures or is entitled to do so and in doing so causes damage, then it is exposed to a claim by the landlord unless the damage is made good.