Nevada Commercial Lease Transactions: Status of Trade Fixtures

Posted by: on Wed, Aug 22, 2012

Share this post

Our firm is regularly called upon to answer questions by clients about the status of fixtures in Nevada commercial leases.

A chattel is a trade fixture if it is devoted to a trade purpose, regardless of its form or size. A trade fixture is an item that the tenant annexes to the realty to enable the tenant to carry on its business and can be removed without material or permanent injury to the real estate. Generally a trade fixture is considered to be the personal property of the tenant. Accordingly, there is a strong presumption that trade fixtures installed by a lessee remain the lessee’s personal property. Courts often consider a three-part test to determine whether an item is a permanent improvement or a trade fixture. The test employed often considers annexation, adaptation and intent. That is 1) the actual or constructive annexation or attachment of the item in question to the realty; 2) the adaptation of the personal property to the unique use of the realty, and 3) the intention of the parties as to whether the item should be deemed a removable trade fixture or a permanent addition to the land.

Some courts have found adaptation satisfied if a particular item is peculiarly adapted to the particular use of the real property in question. If an item is readily usable at other locations, then it may not be deemed uniquely adapted for use on the subject realty. Other courts consider whether the item of personal property in question is essential to the use of the building or improvement in question.

Finally, and more importantly, the third factor refers to the intent of the parties. Intention is ordinarily the major or controlling test in determining a tenant’s right to remove trade fixtures annexed to the leased premises. In fact some courts have held that the adaptation test is inapplicable as between a landlord and tenant. In other words, the adaptation and annexation tests are principally relevant merely as indicators of intent, which is really the controlling consideration for the court and certainly the primary or major test to determine if an item can be removed by the tenant.

Courts typically give the contract or lease terms the primary role in governing the intention of a landlord and tenant with respect to their property rights in fixtures. If the parties’ intention is clear from their contract or lease, then generally such an intention will control.

For example, a typical commercial lease provision might provide as follows:

“All articles of personal property and all business and trade fixtures, machinery and equipment, including but not limited to manufacturing equipment owned by tenant or installed by Tenant at Tenant’s expense on the leased premises shall be and remain the property of Tenant and may be removed by Tenant at any time, provided that Tenant repairs any damage to the Land or Industrial Park caused by such removal.”

The issue of whether a particular item can be removed by a tenant is also an important factor in disputes regarding foreclosures of mechanics liens by contractors and subcontractors.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on real estate law, including commercial lease transactions. We also handle real estate litigation matters.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.