Executors occasionally when selling estate assets run into the “age-old” issue of whether the asset a chattel or a fixture to the land.
The legal test for determining whether an item is a fixture or chattel is set out in the oft followed 1902 decision of Stack v. T. Eaton Co., [1902] 4 O.L.R. 335 at 338, which was followed by our Court of Appeal in La Salle Recreations Ltd. v. Canadian Camdex Investments Ltd., (1969), 4 D.L.R.(3d) 549 (BC CA) [La Salle] at para. 16:
A study of these and other authorities has led me to the conclusion that the principles to be applied are stated accurately by Meredith, C.J., speaking for a Divisional Court in Stack v. T. Eaton Co., [1902] 4 O.L.R. 335 at p. 338 as follows:
I take it to be settled law
(1)That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land.
(2)That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels.
(3)That the circumstances necessary to be shewn to alter the primâ facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see.
(4)That the intention of the person affixing the article to the soil is material only so far as it can be presumed from the degree and object of the annexation.
Haggert v. Town of Brampton (1897), 28 S.C.R. 174, was a dispute between mortgagor and mortgagee where the mortgage charged [p. 179] “‘… all the real estate of them the mortgagors, including all the machinery there was or might thereafter be annexed to the freehold, and which should be known in law as part of the freehold’”. Delivering the judgment of the Supreme Court of Canada King, J., after referring to certain authorities, commented on the object of annexation as follows at p. 182:
In passing upon the object of the annexation, the purposes to which the premises are applied may be regarded; and if the object of setting up the articles is to enhance the value of the premises or improve its usefulness for the purposes for which it is used, and if they are affixed to the freehold even in a slight way, but such as is appropriate to the use of the articles, and showing an intention not of occasional but of permanent affixing, then, both as to the degree of annexation and as to the object of it, it may very well be concluded that the articles are become part of the realty, at least in questions as between mortgagor and mortgagee.
The court in La Salle went on to analyze whether, regardless of the slight degree of annexation of the carpets in question, the goods were affixed to the building for the better use of the goods or for the better use of the building as a building. I quote paras. 23 and 24 of La Salle:
[23] Turning to the object of annexation, the question is whether the goods were affixed to the building, though slightly, for the better use of the goods as goods, or for the better use of the building as a hotel building. Counsel for the respondent pointed out quite correctly, that the question is not whether carpeting is useful or necessary to a hotel, but whether the annexation of the carpets was for the better use and enjoyment of the carpets as such or for the better use of the building as a hotel building. The factors in this case, in addition to others already mentioned, bearing on this question appear to me to be:
1. The unfinished plywood flooring was entirely unsuitable and could not be expected to be used as a floor in a hotel with the character of the Villa Motor Hotel.
2. The under matting and carpeting, if left resting on the plywood by their own weight, would not provide proper floors in such a hotel for reasons of both appearance and utility.
3. The annexation was reasonably required for the completion of the floors as such, having regard to the character and intended use of the areas involved.
4. The evidence shows that in comparable hotels carpeting is quite commonly replaced at intervals of three to five years.
5. It is also established that a ready market exists for used carpeting after its removal.
[24] Weighing all these circumstances, I am of the opinion that the object of the annexation was the better and more effectual use of the building as a hotel and not the better use of the goods as goods. It follows that in my opinion, the carpeting and accessories were annexed to the land in such a manner and under such circumstances as to constitute fixtures within the meaning of s. 12 of the Act.
Royal Bank of Canada v. Maple Ridge Farmers Market Ltd., 1995 CanLII 896 (BC SC) [RBC] at para. 12, in which Mr. Justice Maczko articulated six rules to aid in the application of La Salle:
1) Any item which is unattached to the property, except by its own weight, and can be removed without damage or alterations to the fixtures or land that will need repair, is a chattel.
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2) Any item which is plugged in and can be removed without any damage or alteration is a chattel.
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3) Any item which is attached even minimally (i.e. it cannot simply be unplugged) is a fixture.
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4) If a piece of equipment is attached to a structure, a part of which could be removed but which would be useless without the attached part, then the entire piece of equipment is a fixture. In other words, the item will be a fixture if it losses its essential character because it is of no use unless attached to a permanent and substantial improvement to the premises of which it formed part. The converse is also true. If an item can be detached without damage or alteration, and if the item retains its essential character without the attached part, then it will be a chattel.
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5) Where an item is determined to be a fixture, it may nevertheless be removed if it can be shown that it is a tenant’s fixture. A tenant’s fixture may be removed from the premises during the currency of the tenancy provided that the tenant leaves the premises in exactly the same condition as he or she received them.
6) In very exceptional circumstances not covered by these rules the court should have resort to the purpose test. For example, a mobile home may be resting on the land by its own weight but it may be clearly established that it was intended to be a fixture. These circumstances should only arise rarely and in relation to very large or expensive items.
