QUESTION: I represented a Buyer in her purchase of a home last month. After escrow closed, she found that the Seller had taken several items which we believed were “fixtures,” including a desk and bookcase that were attached to the wall in the office and were pictured in the Listing Agent’s brochure.
The Listing Agent now says that the Seller never intended the office wall unit to be included in the sale. He pointed out that the desk and bookcase were only attached by a few screws for earthquake safety purposes and removal of the wall unit did not damage anything except for some holes which the Seller patched and painted. I said that the advertising included photographs of the desk and bookcase and thus those items were “fixtures” and should have remained at COE. The Purchase Agreement was silent as to whether those items were included or excluded.
Were the desk and bookcase fixtures? Did using photographs of those items make them fixtures?
ANSWER: All standard residential real estate purchase agreement forms specify that items listed in the MLS or marketing materials are not included in the sale unless specified in the Purchase Agreement. (Note: The SFAR Purchase Agreement also excludes items in disclosures.) Simply because personal property items are depicted in advertising material does not determine whether those items are fixtures.
The correct answer to this inquiry turns on whether the desk and bookcase, items of personal property which are usually considered to be furniture, had been converted into fixtures. Although all standard purchase agreements include in the personal property section pre-printed language that “fixtures” and fittings attached to the Property are included, the real question is what exactly is a fixture?
There are basically three legal tests to determine if a personal property item (such as the examples in this question) have become a fixture:
- Intent of the Seller in attaching the item. Is there documentation that the Seller intended to create a permanently affixed desk and bookcase? That documentation is probably not available and that is why this is a difficult test to use. It is the very lack of a writing on the subject that creates the problem at close of escrow. A judge or arbitrator may infer the Seller’s intent to create a permanent fixture from the factors below and the conduct of the Parties, but there is no guarantee that that inference will be made.
- The method of attachment. Were the desk and bookcase attached to the Property in a manner which indicates that they were to be permanently affixed? If yes, then it is more likely to be considered to be a part of the Property and transfers to the Buyer with the sale. However, if the items are relatively easy to remove as described above, then the items may not be deemed to be fixtures.
- Adaptability for use with the Property. Ask yourself: “Is the item essential to the ordinary and convenient use of the Property to which it is attached?” If so, it may have become a fixture, however this test is extremely subjective and may not, by itself, resolve the issue; the items must be viewed in light of the other two tests.
One would think that a common contract term such as “fixtures” would have a very clear, easy-to-understand definition; however, residential and commercial landlords and tenants often dispute whatconstitutes a fixture and there always seems to be significant controversy surrounding that term in residential sales. Because the disputed fixtures in residential sales are often valued at $10,000 or less, these claims are frequently handled in Small Claims Court where the judicial resolutions vary widely, are not binding precedent on other cases, and are completely unpredictable.
Recently the First Appellate District Court dealt with whether or not a flight of stairs that was physically and permanently attached to the exterior of a waterfront home in Marin County was a fixture. These concrete steps were the Seller’s only access to the beach below; the Buyer used the stairs when he toured the property. Simply looking at the structure, it would be easy to conclude that the stairs were a “fixture.”
Although the Seller and Buyer believed the stairway was within the boundary lines, the stairs were actually located on the adjoining property. The court concluded that since the stairs were an encroachment and, because “the Buyer agreed to take the property in its present condition of title, subject to all encumbrances. . . whether of record or not,” the Appellate Court refused to accept the argument that the stairs were a fixture. As an encroachment, the stairs belonged to the next-door neighbor.
This particular decision cannot be cited as precedent for any purpose but it does serve to remind everyone that appearances can be deceiving; no one should simply assume that anything is a fixture.
PRACTICE TIPS:
Seller’s Agent:
- At the outset of the listing, discuss with the Seller what personal property items (that may be attached to the home) the Seller wants to take at the close of escrow. Encourage Sellers to go into each room and make a list of everything that they want to keep. Remember that the list of items should be reviewed prior to creating any marketing material so that none of those items are included. The Seller may not be obligated to sell the advertised feature but the Seller’s Agent could still face liability for false advertising.
- All personal property items that a Seller wants to keep (which may be attached to the home) should be listed in the Purchase Agreement or Counter-Offer as being “EXCLUDED.”
Buyer’s Agent:
- Do not assume that because an item appears to be attached to the Property that it is a fixture that is sold with the house; do not rely on any listed “features” or pictures in the marketing material. The only personal property items that the Seller is required to transfer to the Buyer at the close of escrow are those items specifically delineated in the Purchase Agreement as being “INCLUDED.”
- If an item appears to be a fixture (e.g., refrigerators, spas/hot tubs, custom storage cabinets, closet organizing systems, electric charging stations, outdoor grills, children’s’ play structures, etc.), ask the Buyer if the Buyer wants those items. Check with the Seller’s Agent before completing the Buyer’s Offer as to any of the Seller’s requested personal property exclusions and then work with the Buyer to create an Offer that includes the Buyer’s reasonable list of the included personal property. A small amount of extra time on the Purchase Agreement can avoid a great deal of upset at the close of escrow.
DO NOT FORWARD TO SELLERS OR BUYERS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2019 09/13/19