Steel a march
- Breaking the mould
- Guarantees and the "one that got away"
- Fracking update
- Steel a march
- Put a cap on it
- Extending the reach of Adjudication into Collateral Warranties
First appeared in Informer: Real Estate Newsletter - Autumn 2013
The recent High Court decision in Peel Land and Property (Ports No. 3) Ltd v TS Sheerness Steel Ltd  serves as a useful reminder of the principles a court will take into account when determining whether a tenant is entitled to remove equipment installed at the premises on lease expiry.
Under the general law, a tenant is entitled to remove chattels and those removable fixtures it has installed at the end of the term even where they have been installed pursuant to an obligation under a lease. The latter category are classified as tenant's fixtures. The general position can, however, be displaced where such equipment forms such an integral part of the structure or fabric of the property to the extent that it becomes part of the property. It then loses its status as a tenant's fixture.
The dispute in the current case above arose from a lease granted in 1971 for the erection of the Sheerness steel works in Kent. Under the terms of the lease the tenant was obliged to build and equip the steelworks so it was capable of producing 50,000 tons of steel product. The tenant brought in heavy industrial plant comprising furnaces, cranes, water coolers and fume treatment machines. The removal alone of this equipment the end of the term was estimated to take between 12-18 months at a cost of £3-4 million pounds – perhaps not therefore the sort of items which one might normally view as tenant’s fixtures.
In 2012 the steel works ceased trading and the lease was assigned to the current tenant, who subsequently proposed to sell the equipment on site. The lease had standard wording to the effect that the tenant was required to yield up fixtures and fittings (save for tenant's fixtures and fittings) at the end of the term. The landlord contended that the tenant was not entitled to remove the fixtures on the basis that the machinery formed part of the land. The landlord relied upon the tenant's covenant to equip the steelworks together with its covenant not to alter the premises except in connection with its use for an industrial purpose approved by the landlord in this regard. The tenant argued that, under the general law, it maintained the right to remove its chattels and removable fixtures – even very difficult and cumbersome ones.
The Court held that an item could constitute a removable tenant's fixture where it had been installed for the tenant's trade and was capable of being re-used elsewhere, notwithstanding that the removal of such item would be extremely complex, time consuming and expensive. On that analysis, the majority of these large items were held to be tenant's fixtures. The remainder of items were held to be landlord's fixtures on the basis that they were considered to be too integrated into the building and would be substantially destroyed in the process of removal.
The case is an interesting illustration of the application of the law of chattels and fixtures to such an unusual premises and items of very large industrial machinery. It also serves as a useful reminder to landlords that any wish to restrict the tenant's right to remove fixtures must be expressly and unequivocally set out in the lease. If it is not, then the common law will prevail and the tenant's right to remove all chattels and removable fixtures it has installed at the end of the lease term will be unaffected. For tenants the case is an important reminder that they might not be entitled to remove all the items they have installed at premises if such items are held to now be part of the land – even if they have done so at their own cost.
Note: The case has been appealed to the Court of Appeal.