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Can fixtures be owned separately to the land?

Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central Legal recommends you seek professional advice before taking any action based on the content of this Bulletin.

31/01/2018

By Law Central Legal

The term ‘fixture’ when used in a legal sense has a technical meaning which is distinct from the everyday usage of the word. Fixtures are objects that become annexed to the land in such a way that the object loses its independent identity and it becomes a part of the property. Once an object becomes a part of the property it belongs to the property owner. The fixture will pass with the property if the property is sold. An example of a fixture is a window or a large tree, upon the sale of the property; the seller cannot take the window or large tree with them. A fixture which remains attached to the property is known as an ‘unsevered fixture’.

If an object is not a fixture, then it will be a chattel. Chattels are objects on the property but are not assumed to have become a part of the property. Personal possessions are generally considered to be chattels. The owner of the property is entitled to remove chattels from the property once they have sold it. The approved test in Australia for determining if an object is a fixture or chattel is the two stage test set out in Holland v Hodgson (1872) LR 7 CP 328.

Can the land and an unserved fixture be owned by separate people?

In some circumstances, it may be desirable for one party to own the land and another to own the fixtures on the land. This might occur in one of the following ways:

Fixtures are considered a part of the property and the law generally will perceive the fixture as inseparable from the property. An issue then arises when parties agree by contract or deed to vest the ownership of the fixtures separately to the ownership of the land. Which law will prevail? It is becoming an increasingly common issue, due to the rise in companies selling an unsevered fixture in the form of plant or machinery and then leasing it back off the purchaser.

The two parties will usually have an understanding free from any issue. The problem most often arises when ownership needs to be determined for tax purposes. Does the property owner still have ownership of the fixture despite the contractual agreement between the parties? Or does the contractual agreement prevail over the law and ownership of the fixture is now vested in someone other than the land owner? This issue was examined in the case of Standard Portland Cement Company Pty Ltd and Another v Good (1983) 57 ALJR 151.  

Case Study: Standard Portland Cement Company Pty Ltd and Another v Good (1983) 57 ALJR 151

This case was decided by the Privy Council on appeal from the New South Wales Supreme Court. In this case, Standard Portland Cement sold their land to Good. On the land there was a large cement mill known as the ‘O Mill’. It was undisputed that the ‘O Mill’ was a fixture. The contract of sale included a special condition that Good would grant Standard Portland Cement a right to enter the property for the purpose of removing the ‘O Mill’, provided that it was done within 12 months from the date of contract.

Standard Portland Cement failed to exercise the right within the contracted 12 months but did seek to exercise the right at a later date. The Privy Council held that the ‘O Mill’ was excluded from the contract of sale and therefore the ownership of the mill was never passed to Good. Standard Portland Cement had been the owners the entire time. They were therefore able to recover the mill after the contracted period.

The implication of the Privy Council’s decision is that a legal interest in a fixture is capable of being vested in a person who is not the owner of the land. One party can have a legal interest in the fixture while another owns the land. Standard Portland Cement is still a binding precedent in Australia, as ruled by the Western Australian Supreme Court of Appeal, in the case of Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228. Recent Australian case law has ruled the interest in a fixture may be deemed to be legal or equitable in nature. This is decided on the individual circumstances of each case.

Protecting your interest in a fixture when someone else owns the land:

The Torrens System of land which operates in Australia does not have a provision which specifically allows for the registration of interests in fixtures. This does not mean that the interest cannot be registered at all. Someone who has an interest in a fixture will often be able to lodge a caveat with the Registrar. The effect of a caveat will be to record the claimed interest on the register. Unfortunately this does not confer absolute protection to the interest. But it will provide some protection by operating in a similar manner to an injunction. The general operation of a caveat prevents the registration of an inconsistent interest without first resolving the inconsistencies.

Unfortunately, an interest in a fixture cannot be protected by recording it on the Personal Property Security Register. Section 8(1)(j) of the Personal Properties Securities Act 2009 (Cth) specifically excludes the act from applying to interests in fixtures.

Gold and Platinum members read on for more information on the nature of the interest created in the fixture.


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Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central Legal recommends you seek professional advice before taking any action based on the content of this Bulletin.

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