Distinction Between Real and Personal Property

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This article is a topic within the subject Property, Equity and Trusts 1.

Contents

Required Reading

Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 57-75 [1.70-1.98]

Traditional Classification and Terminology

[1] The basic and traditional distinction in property is as follows:

  • Real Property: Land. Divided into two sub-categories:
    • Corporeal hereditaments - rights of possession (tangible real property).
    • Incorporeal hereditaments - lesser rights to land (intangible real property, such as an easement of way).
  • Personal Property: Chattels. Divided further into:
    • Chattels real - a hybrid between personal and real property. For example, leaseholds (right in property, but not complete ownership).
    • Chattels personal - all other chattels. These can also be divided into:
      • Choses in Possession - tangible physical objects.
      • Choses in Action - Intangible things, such as patents, copyrights, deeds etc. Choses in action are really a 'right to sue' (on the basis of copyright etc)

The legal ramifications of the distinction between real and personal property are:

  • Real property:
    • Can only enforce a contract of land if there is an agreement in writing.[2]
    • Specific performance is a remedy: Land is recoverable in itself (and not merely damages) if a claim succeeds.
  • Personal property:
    • Can enforce in the absence of a written agreement (can be oral etc)
    • No specific performance, damages only: The property itself is not recoverable, the party will be compensated with damages.

The distinction shows how the law considers ownership over land as different to ownership of other things (because land is immovable).

[3] The above distinction between real and personal (land and chattel) are, as always, not fixed. Often, the distinction between land and chattel is very difficult to distinguish. Thus, courts tend to rely on policy arguments to make the distinction. The following are some examples of the courts applying such distinctions.

Doctrine of Fixtures

[4] The doctrine of fixtures provides that personal property may become real property if it is annexed (attached) to land.[5]

  • In other words, if a chattel is affixed to or placed on land, it may become a part of the land, and even transfer ownership (to the owner of that land, without compensation).
  • This means that the doctrine resolves disputes contesting title, in the absence of an agreement.
  • It applies especially to tax and stamp duty law where ownership can determine liability for stamp duty and tax payments.

In Belgrave Nominees v Barlin-Scott Airconditioning, the court was required to determine whether an air-conditioning plant was a fixture, and ruled as follows:

  • In determining whether an object has become a fixture, one employs a two step process - examining degree of annexation and intention of the person who affixed the chattel.
    1. Degree of annexation: if the object is attached to the land by more than its own weight, then it raises the presumption that it is a fixture. If it is not, then it raises the presumption it is a chattel.
    2. Intention: after the presumption has been raised, the party seeking to refute it has the onus of proving that the intention (of the party which affixed/didn't affix the object) was that the object be a fixture/chattel despite being unattached/attached respectively.
  • In determining the intention of the parties, the court considers:
    • (a) the nature of the chattel;
    • (b) the relation and situation of the two parties;
    • (c) the mode of annexation (how well attached was it); and
    • (d) the purpose for which the chattel was fixed.

In the judgment of Belgrave, the court discusses Hobson v Gorringe:[6]

  • Facts:
    • A gas engine was let out on a hire and purchase system. The agreement in writing provided that the engine will not become the hirer’s property until the payment of all installments.
    • The engine was strongly affixed to the land of the hirer.
    • The hirer went into liquidation and defaulted on his installments. He also defaulted on his payment to his mortgagee, who came in and repossessed the hirer's land, including the affixed engine (claiming it was a fixture).
    • The Plaintiff [Hobson] tried to get his engine back, since the agreement specifies that it did not become the hirer's property, and therefore the mortgagee [the Defendant, Gorringe], cannot repossess it as a fixture.
  • Held:
    • The hire-purchase agreement was an incidental agreement made without the knowledge of the mortgagee. It is unfair for a third party (such as the Defendant) with an interest in the land, and therefore does not bind a third party.
    • Since the engine was sufficiently annexed to the land to become a fixture, it is therefore a fixture which can be repossessed by the Defendant.

It seems that both subjective and objective circumstances have to be examined in determining the intention of the party removing the chattel or fixture.[7]A subjective test was used in Ball-Guymer v Livantes,[8] but an objective test was used in Permanent Trustee Australia v Esanda Corporation.[9]

Other examples include:

  1. A-G (Cth) v RT Co Pty Ltd (No 2)[10]
    • In RT, two printing presses attached by bolts to the building were held not to be fixtures, as the purpose of the bolts was merely for efficient operation of the press.
  2. Reid v Smith[11]
    • In Reid, a lessee built a house that rested on its own weight on brick piers. Upon termination of the lease, the landlord sought to restrain the lessee from removing the house as he claimed it had become a fixture. The house was held to be a fixture. Even though it was intended to be a temporary dwelling, the building was held to be intended to be part of the freehold[12]. However, Griffith CJ clearly pointed out this was not to become a general rule. An unattached house was not necessarily a fixture; in most other circumstances, a temporary dwelling might remain a chattel.[13]

Another case considering fixtures was May v v Ceedive Pty Ltd:[14]

  • Facts: A practice had developed in mining areas, that lessees would build and inhabit houses on land. The houses would become their own property, while the land remained the property of the original owner. In this case, May acquired a mining house, and formed an arrangement with Ceedive to pay a weekly rent for the land. Ceedive increased the rent, and May refused to pay.
  • Held: The house was a fixture on the land as per the objective standard of the law, notwithstanding subjective intentions of the parties to the contrary.
    • Upon looking at ‘all the surrounding circumstances’, the presumption that the house is a fixture has not been rebutted.
    • The agreement evincing an intention for the house to remain a chattel was between the parties, and not the builder who affixed the house. The intention which matters is not the parties', but the one who originally affixed the house.
    • The fact that the house would have to be demolished to be removed strongly indicates that it is a fixture (chattels are movable!)
    • The purpose for which the house was built was a residential dwelling house and it was affixed with the intention that it remain in position permanently.

Another case examined is Leigh v Taylor:[15]

  • Facts: Ms Taylor was a life tenant. She affixed expensive tapestries to the wall. After her death, the remainderman claimed the tapestries were a fixture, as they were ‘affixed’ to the wall with wood, nails and screws.
  • Held: The tapestries were fixed for the purpose of ornament in the only way possible for their use and enjoyment. They could also be removed fairly easily, without causing damage to the house. Thus, they did not become a fixture the property of the remainderman, but were removable by the executor of the tenant for life.
  • This case highlights the underlying rationale for the doctrine of fixtures: originally, it was to prevent people from removing chattels from freehold that would physically destroy part of the freehold. These days, it is possible to remove chattels without destroying the actual realty. Thus, it makes it difficult to determine cases that are at the margins of the rule.

It is thus apparent that recent authority strongly favours the objective standards of the law, as opposed to subjective intentions. At any rate, courts are required to look at ‘all the surrounding circumstances’ in deciding whether a particular item is a chattel or a fixture. Nonetheless, it is unclear where the line is to be drawn – despite the statements in Ceedive, it is apparent that cases are decided on their own facts.

Policy Decisions

[16] The following are policy decisions with regards to what equipment is or isn't a fixture:

  • Mining equipment has been held to be a chattel due to the temporary nature of mines and the transportability of the equipment.[17]
  • Irrigation equipment has been held to be a chattel where damage is would not be caused upon their irrigation.[18] However, where its removal would cause damage, irrigation equipment has been held to be a fixture.[19]
  • Houseboats have been held to be a chattel, again because they can be moved without damage.[20] However, if moored securely on a permanent basis, a boat can be a fixture.[21]

Tenant’s Fixtures

[22] In certain circumstances, affixed chattels can be removed by the affixer, despite the fact they are fixtures. The most common example are tenant’s fixtures.

  • Tenants may install many fixtures on their leased property during their tenancy, but it would be economically unjust to forbid them from taking it with them at the end of their tenancy.
  • Tenant’s fixtures include shelves and counters[23] and domestic and ornamental fixtures.[24]
  • The lease will generally specify such things. [25]

Today, if the tenant has installed (from his own pocket) any fixtures, he may remove them any time upto termination of the lease.[26] Upon termination, the situation is less clear.

Tenancy at Will

In cases of tenancy at will[27] and where specified in the lease, the tenant usually has a ‘reasonable time’ to remove their fixtures. This right does not apply where the lease is forfeited or surrendered.

  • If this lease ends and the tenant remains in possession because of a new lease, he is still allowed to remove the fixtures.[28]

Agricultural and Residential Tenancies

[29] The common law forbade removal of agricultural fixtures under tenants’ rights of removal.[30] Legislation in NSW has modified this rule to allow them to remove certain fixtures in specified circumstances - for more information, see Agricultural Tenancies Act 1990 (NSW), s 14 (also ss 5-7). Residential tenancies are likewise governed by legislation.

Chattels Annexed Without Permission

[31] Generally, chattels annexed without the owner’s permission preclude recovery.

  • This was the case in Chateau v Chateau,[32] where the owner of one vineyard planted vines on a neighbouring vineyard without either party’s knowledge. The vines were held to be a fixture on the neighbouring property.
  • Similarly in Brand v Chris Building Society,[33] the defendant mistakenly built a house on the plaintiff’s land. The plaintiff sought a restraining order to demolish the house, but the defendant claimed that the plaintiff knew about the mistake at the beginning of construction, but took no steps to stop it, and undertook to give the plaintiff the choice to either (a) have the property removed, or (b) keep it for 2145p.
    • Hudson J entered judgment for the plaintiff, holding that in the absence of something in the nature of fraud of the plaintiff’s part, there was no equitable principle upon which the defendant could rely to defeat his claim.

End

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References

Property Textbook refers to Edgeworth et all, Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008.

Equity Textbook refers to Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012.

  1. Property Textbook, pp. 57-8 [1.70-1.72]
  2. The Conveyancing Act 1919 (NSW) s 54A (1).
  3. Property Textbook, pp. 1.78
  4. Property Textbook, pp. 61-2 [1.79]
  5. ‘A fixture is a thing once a chattel which has become, in law, land through having being fixed to the land.':Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 (Jordan CJ).
  6. [1897] 1 Ch 182
  7. Property Textbook, pp. 66 [1.81]
  8. (1990) 102 FLR 327, 330.
  9. (1991) 6 BPR 13 420, 13 423
  10. (1957) 97 CLR 146
  11. (1905) 3 CLR 656
  12. A freehold refers to complete ownership of property, including land and any immovable fixtures
  13. Property Textbook, p. 67 [1.84]
  14. (2006) 13 BPR 24 147
  15. [1902] AC 157
  16. Property Textbook, pp. 69-70 [1.86-1.87]
  17. Eon Metals NL v Commissioner of State Taxation (WA) (1991) 33 ATR 601
  18. NAB v Blacker (2000) 179 ALR 97.
  19. Litz v NAB [1986] Q Conv R 54-229, 57 550.
  20. Chelsea v Pope [2000] 1 WLR 1941.
  21. Rudd v Cinderella Rockerfellas [2003] 1 WLR 2423
  22. Property Textbook, pp. 71-2 [1.89-1.90]
  23. Harding v National Insurance Co (1871) 2 AJR 67
  24. Spyer v Phillipson [1931] 2 Ch 183
  25. For example, as it did in Dr Bronte Douglass v Lawton Pty Ltd [2007] NSWCA 89
  26. The Residential Tenancies Act 2010 s67 (1)
  27. Tenancy of uncertain duration
  28. NZ Govt Prop Corp v H M & S Ltd [1982] 1 All ER 624
  29. Property Textbook, pp. 72-3 [1.91-1.92]
  30. Elwes v Maw (1802) 102 ER 510
  31. Property Textbook, p. 73 [1.93]
  32. [1978] ACLD 258
  33. [1957] VR 625
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