It’s a Fixture, no it’s a Trade Fixture and why it matters in Commercial Leasing

I am a Commercial Leasing nerd.  Seriously.   A Case Management Master once referred to me by that description during a pre-trial.  So, unless you’re a Commercial Landlord or Tenant or a kindred spirit Commercial Leasing Nerd, then this Blog is probably not for you.

Then again, I find this stuff fun, so maybe you will too.

Most Commercial Landlords & Tenants have at the least a signed Offer to Lease, if not a complete Lease Agreement.  This is important because if there is no written Lease agreement defining what is a fixture or trade fixture, you’re then dealing with “common law” meaning what the Courts decide over the years.

Recently, the Ontario Court of Appeal[1]  reminded us all what the consequences are of “getting it wrong” as a Landlord, when it comes to fixture or trade fixture, can be.

In order to understand what all the fuss is about, let me pause here to give three definitions you need to understand this area of law.  If you’re in a Commercial Lease, you want to read this part:

“Chattel” – an item of property that is not real estate.

“Fixture” – an object physically attached to leased premises that becomes a permanent part of the premises and cannot be removed by the Tenant at the end of the tenancy.

“Trade Fixture” – an object, owned and used by the Tenant to conduct business which is physically attached to leased premises and can be removed at the end of the tenancy without causing material damages to the premises.

In the recent court decision, the Court of Appeal found that the Landlord was wrong when it decided a driving range deck, deck canopy, golf ball shack, driving range barrier poles and nets were  fixtures.  The Landlord.  The Court of Appeal agreed the items were Trade Fixtures and the Tenant should have been allowed to remove them after the tenancy was ended by the Landlord for failure of the Tenant to pay rent.

The Landlord had used the trade fixtures to carry on a golf business for its’ own profit for two years after the tenancy ended.   The trial Judge ordered the Landlord to pay the Tenant the depreciated value of the trade fixtures, which was almost $ 190,000.00.  The trial Judge also ordered the Landlord to pay the Tenant $ 80,000.00 in “exemplary” damages.  These are damages that are intended to punish, in this case, the Landlord, for intentional bad acts that are malicious, violent, oppressive, fraudulent wanton or grossly reckless.

Fortunately for the Landlord, the Court of Appeal disagreed on the $ 80,000 exemplary damage award finding that the Landlord was not malicious, nor did it behave in a manner that was a marked departure from ordinary standards of decent behaviour as the Landlord honestly believed the trade fixtures were fixtures and acted accordingly.

While I’m sure the Landlord was relieved to have $ 80,000.00 removed from the Judgment, that Landlord still had to pay the legal fees of the Tenant for the trial as well as their own lawyer’s fees, together with the $ 190,000.00.

This is an expensive way to learn what the difference is between a fixture and a trade fixture and a good example of why a lawyer with experience in Commercial Leasing issues, particularly at the end of the Tenancy, you know, the type of lawyers that Judges and Masters consider a “Commercial Leasing Nerd”.

Inga B. Andriessen JD

Sr. Lawyer & Commercial Leasing Nerd

[1] 2105582 Ontario Ltd. (Performance Plus Golf Academy) v. 375445 Ontario Limited (Hydeaway Golf Club), 2017 ONCA 980 (CanLII)