Most people are familiar with the distinction between a chattel and a fixture when it comes to land. Generally speaking, unless there is anything contrary in the document itself, a contract for the sale of land, or a mortgage, will extend to apply to all fixtures on the land, but not chattels.
It is easy to take for granted that some types of objects are fixtures, and then automatically assume that they will be covered by a contract for sale of land or a mortgage. In reality it is not so simple. Indeed there are some circumstances in which a seemingly textbook example of a fixture, like a house, may actually be a chattel.
What is a fixture?
A chattel is a tangible movable item of personal property. The authorities define a fixture as something that once was a chattel, that has become fixed to the land with an intention that it shall remain in place for a permanent or substantial period of time. It is ultimately the intention of the person placing the item on the land that is determinative.
However, in determining the intention the court will not simply take the word of the person who installed the object at face value, rather, it will consider the objective facts surrounding the installation to presume the intention of the person who placed the object on the land. This means that each case will ultimately turn on the facts before the court. Indeed, the courts have described this area of law as “not now so simple”.
Whilst each case will turn on its facts, courts have developed a series of questions to ask when they are trying to get to the presumed intention of the person who placed the object on the land. These include, but are not limited to, whether the object rests on its own weight, how long it was intended to remain in place, what the object is used for, whether it can be moved without damaging itself or the land, and the subjective intention of the person who placed it there. No single answer to any of the questions is determinative, and the court will consider the facts as a whole to reach an outcome.
What about houses?
The question over whether a house is a chattel or a fixture has come before the courts a number of times. To a lay observer, it seems obvious that a house will be a fixture, but the courts have found circumstances where this is not the case.
For example, in Elitestone Ltd v Morris  1 WLR 687, it was held that a house that has been constructed in such a way as to be removable may remain a chattel, despite being connected to utilities such as water and electricity.
Similarly, in Permanent Trustee Australia v Esanda Corporation Ltd (1991) 6 BPR 97, the court had to consider whether a “manager’s cottage” placed on farm land was covered by a mortgage. The cottage was described in the following terms:
“Concrete piers, sawn timber frame weatherboard walls, Colourbond roof, lined and sealed plaster and asbestos cement. Four bedroom, ensuite, kitchen with walk in pantry, L shaped family, dining and lounge with raked ceiling, timber lined. Laundry, bathroom. Slow combustion stove for space hearing, dishwasher, carpeted, septic, electricity, telephone.”
The evidence before the court was that the cottage was moved into place on the back of a truck and was installed by resting on top of concrete pillars that were sunk into the ground.
The lenders seeking to assert the cottage was part of their mortgage argued that it was a fixture due to its level of annexation to the land. The borrower had conceded that the concrete pillars that the cottage rested on had become fixtures. The cottage was connected to a veranda that the borrower also conceded was a fixture.
Nonetheless, the court found that the cottage was a chattel, because it could be removed without causing damage to itself of the land, and it was intended to be on the land for no longer than fifteen years, for the purposes of a horticulture project on farmland. In relation to the veranda and pillars, the court stated:
“That may mean that the piers become fixtures, but it does not mean, in my view, that the house resting upon them do … similarly I do not consider that the concession that the veranda may constitute a fixture affects the house.”
This led to an amusing result where the veranda and piers were covered by the mortgage, but the house was not. Therefore great care has to be taken in assuming whether a residence is a fixture. Just because it has all of the comforts one would expect of a residential home does not mean that it will necessarily be fixed to the land.
This question can have real impacts on many homeowners throughout Australia. Of course, it can impact those who conduct commercial operations on land, such as cabins for tourists, or cottages for farmland operations.
However, as noted above, a fixture is presumed to be covered by a mortgage. This is so regardless of whether the object in question was installed after a mortgage was entered into. This can lead to interesting questions arising for those who own their own property.
For example, if you install a granny flat on your land, you ought give some thought to the question as to whether it will automatically be included if you sell the property. With a sale, the contract can be carefully drafted so as to clarify whether it is included.
However, as we can see from the above, the answer may not be as straightforward as one would expect, and depending on the amount that the installation increases the value of the property, may become a real sticking point with the mortgagee in the event of default. Those that find themselves in this position should seek legal advice to clarify whether structures on the land are indeed a fixture or a chattel.