Tuesday, 17 October 2017

To Avoid Contract Disputes, Itemize Items That Convey

Written by Posted On Tuesday, 18 April 2017 18:59

Question. We have signed a contract to buy a house. When we first saw it, before signing the agreement, there were two refrigerators. One was in the kitchen and one was in the basement. The real estate agent told us that both refrigerators would stay with the property. Settlement is scheduled for next week, and we have now been told that the basement refrigerator has been removed. Our mortgage lender, however, insists on our signing a statement that the refrigerator remains as part of the house, and as part of the lender's security.

I do not understand when a refrigerator is a fixture and when it is not.

Answer: Your question has stumped a lot of people, including several law professors to whom this question was posed.

There is no easy answer as to what is a fixture. An item, standing by itself, may not be a fixture, but when made part of the property, it can change its characteristics. For example, a kitchen sink in a plumber's shop window is personal property. Once it has been installed in your house, however, it becomes a fixture and is part of the real estate.

Generally speaking, and in the absence of a contractual agreement to the contrary, fixtures remain with the house. Personal items can be removed by the seller.

As you can see, it certainly makes a difference if an item is characterized "personal property" or "fixtures." For example, can a seller take a removable wet bar from the basement, even though the plumbing is hooked up? Does a window air conditioning unit convey with the property?

There are no easy answers to any of these questions. The courts have applied a number of tests, including:

  • The manner in which the article is attached to the real estate. If the article can be removed without substantial injury to the building, it is generally held to be personal property.

  • The character of the article and its adaptation to the real estate. If, for example, an article was fitted or constructed specially for a particular location or use in a house, one can argue the article becomes a permanent part of the building, and thus a fixture.

    For example, the courts have held these items to be fixtures: pews in a church, screens and storm windows specially fitted to a house and electronic computing equipment installed on a floor specially constructed for it.

  • The intention of the parties. What would the average person consider the article to be? Gas stoves, for example, are intended to remain in a house permanently, and thus are fixtures. The so-called "Murphy beds" fastened to the wall on pivots are considered fixtures. But roll-away beds that are not fastened to the wall are not fixtures (except in Wisconsin).

    Going through this fascinating history of fixtures, one important caveat comes to mind.

    When in doubt, spell it out in the contract. Furthermore, if the seller or the real estate agent verbally advise you that a particular item will convey, again spell it out in the real estate contract. If you want the refrigerator to convey with the property, put it in the contract to avoid any confrontation in the future.

    Too many homebuyers are often disappointed because they relied on what the agent or the seller said -- or what they thought the agent said -- and just did not reduce those representations to writing into the sales contract.

    In your case, I would argue that the second refrigerator stays with the property. This is based not necessarily on the fact that it is a fixture, but on the promises made by the seller's agent -- and on which you relied.

    Custom in the area is also important. I understand that in the Western part of the country, refrigerators do not necessarily convey; however, they do in the Eastern states. But don't rely on custom. If you are the seller and want to take a particular item with you, spell it out in writing in the sales contract. And if you are the buyer and want a particular item to stay in the house, spell it out in writing in the sales contract.

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    Benny L. Kass

    Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of Kass, Mitek & Kass, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

    Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

    www.kmklawyers.com

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