What Is Included in a Purchase/Sale of Real Estate?
When buying or selling real estate, it's crucial to understand what is included in the transaction. The key distinction between chattels (movable items) and fixtures (items attached to the property) plays a central role in determining inclusions and exclusions. This post will clarify the legal definitions, standard contract wording, and how to avoid disputes over specific items.
Chattels vs. Fixtures: The Legal Distinction
A chattel is an item of personal property that is movable and not permanently attached to the land or buildings. Examples include furniture, portable appliances, and artwork hung by a hook.
A fixture, on the other hand, is an item that is attached to the property, even slightly, and is presumed to be part of the real estate. Examples include built-in shelving, light fixtures, and plumbing installations.
The courts use specific tests to determine whether an item is a chattel or a fixture. These include the method of attachment, the degree of permanence, and the item's intended use. Understanding this distinction is critical for both buyers and sellers.
Standard Inclusions:
The standard wording in a real estate contract typically includes the following:
"The Purchase Price includes any buildings, improvements, fixtures, appurtenances and attachments thereto, and all blinds, awnings, screen doors and windows, curtain rods, tracks and valances, fixed mirrors, fixed carpeting, electric, plumbing, heating and air conditioning fixtures and all appurtenances and attachments thereto as viewed by the Buyer at the date of inspection."
These items are considered fixtures and are presumed to remain with the property unless otherwise stated.
Common Items Requiring Specific Listing
While the standard contract covers many fixtures, certain items need to be explicitly included or excluded to avoid disputes:
- Appliances: Built-in appliances are considered fixtures, while free-standing ones are chattels and must be explicitly included.
- Drapes and Window Coverings: Blinds are fixtures and included by default, but drapes (as chattels) are not unless listed in the contract.
- Hanging Mirrors: Fixed mirrors are included, but hanging mirrors are chattels and can be removed.
- Fixtures of Sentimental Value: If you wish to exclude a specific item, such as a light fixture, it needs to be specifically excluded in the contract. Better yet, remove the item before the sale process begins so there is no misunderstanding or opportunity for confusion
Legal Tests for Determining Inclusions and Exclusions
In Royal Bank of Canada v. Maple Ridge Farmers Market Ltd. (1995), the Supreme Court of British Columbia laid out the following tests to classify items as chattels or fixtures:
- Attachment by Weight:
- An item unattached except by its own weight is a chattel unless removal would cause damage or require repairs.
- Example: A walk-in freezer that cannot be removed without altering the premises is a fixture.
- Plugged vs. Fixed Items:
- An item that can be unplugged, like a toaster, is a chattel.
- Electrical outlets or jacks attached to the wall are fixtures.
- Slight Attachment:
- An item requiring screws, nails, bolts, or detachment of plumbing is a fixture.
- Functional Dependency:
- If an attached item would be useless once removed, it is a fixture.
- Example: A crane on permanent tracks is a fixture because it cannot function independently of the tracks.
- Tenant’s Fixtures:
- Fixtures installed by a tenant can be removed during the tenancy, provided the premises are restored to their original condition.
- Purpose of Attachment:
- In rare cases, the purpose of attachment is examined. For example, a mobile home resting by its own weight may be a fixture if intended to be part of the property.
Practical Tips for Buyers and Sellers
- Sellers: Make a list of any exclusions prior to your sale. And consider replacing or removing items with sentimental value before showing the property.
- Buyers: Clarify which items are included in your purchase. Ensure any non-standard inclusions, such as appliances or decorative items, are explicitly listed in the agreement.
Conclusion
By understanding the distinction between chattels and fixtures and reviewing the standard wording of real estate contracts, buyers and sellers can avoid disputes and ensure a smooth transaction. If in doubt, consult your real estate professional or legal advisor for guidance.
Source: BCREA Legally Speaking