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The OREA office will close for the holidays at 12 p.m. Tuesday, December 24th.  Normal business hours will resume on Thursday, January 2nd.  Happy Holidays!

August 15th - 2016

Chattels versus fixtures: Explain the difference to clients

Ensure that your clients understand clearly which items will stay and which will go when a property sells. Three Realtors share insights.

Kitchen

Ensure that your clients understand clearly which items will stay and which will go when a property sells. Three Realtors share insights.

KitchenMany clients don’t understand the distinction between chattels and fixtures, and it’s up to you as a REALTOR® to educate them. The Edge newsletter talked with three real estate professionals and a lawyer about how to prevent confusion.

A chattel is a moveable possession and personal property that can be removed without injury to the property. Chattels are normally deemed to be excluded from the purchase price, unless they are specifically noted in the agreement of purchase and sale (APS). On the other hand, fixtures are normally deemed to be included in the purchase price, unless the APS specifically excludes them. 

If buyers aren’t clear on the difference between chattels and fixtures, they could be very unhappy come closing day, says Rennie Lowes, a Peterborough Realtor with 13 years of experience.

“The buyers will call their Realtor with bad news that something they wanted was missing when they moved in, and it can be a real disappointment for them,” says Lowes. “The Realtor can feel helpless if the seller took the item. It may just take a phone call to clear things up, but the buyers may end up contacting a lawyer, so it’s best to prevent that from happening by being clear and specific from the beginning and getting things in writing.”

"The difference between chattels and fixtures should be explained to clients early in the process"

Lawyer Lou Radomsky, outside counsel for OREA’s standard forms committee, explains “The law says that fixtures stay with the property. Chattels are things that go. However, points of dispute can arise between buyers and sellers about whether something is a chattel or a fixture.”

Differing opinions about what constitutes a chattel versus a fixture can lead to litigation, says Stan Reljic, a Georgian Bay Realtor who has been in the business for eight years. “These disputes can end up in court with insurance companies getting involved,” says Reljic. “That’s not what you want, especially when these situations can be addressed in the first place and, in most cases, prevented.”

The difference between chattels and fixtures should be explained to clients early in the process, advises Lowes. He tells sellers specifically which items they should leave behind because those things are typically considered fixtures. Conversely, he explains to buyers which items normally stay and which ones go, outlining any exceptions.

“A buyer walk-through as part of the closing is very wise,” Lowes says. “If certain items are gone that you expected to be there, the walk-through gives you can opportunity to rectify the problem before the date of closing.”

Unfortunately, the status of some items is not always black and white. For example, wall-mounted televisions are a modern conundrum, because the brackets are attached to the wall, even though the TV is not. And are the brackets holding the drapes chattels or fixtures? The items discussed most often in this context are light fixtures and window coverings, Lowes notes. Mirrors, medicine cabinets and shelves can also be points of contention.

“Elaborate window coverings have tremendous value in a buyer’s eyes,” says Reljic, “but that doesn’t stop sellers from wanting to take them. And with an item such as a light fixture, if the seller plans to remove it, you should advise them to specify what happens afterward. Will it be replaced with a new fixture? It’s important to make it clear what will remain.”

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Controversy about chattels and fixtures can lead to interesting inclusions and exclusions on an Agreement of Purchase and Sale (APS), says Heather Hadden, a Toronto Realtor with 10 years of experience. She tells of a seller whose backyard contained an enormous fish pond stocked with exotic koi (carp). Although the pond stayed, the seller asked that the contract include provision for the koi to be removed, since they were imported from Asia at a substantial cost.

“It’s most important to specify what’s excluded,” Hadden says. “On the other hand, unexpected inclusions are a bonus for the buyer.”

Some Realtors suggest that sellers remove a dramatic item from the premises before showing the house if it is likely to cause confusion about whether it is included. However, Hadden doesn’t subscribe to that view. In Toronto, home staging is the norm and a beautiful fixture enhances the premises, making the property more appealing, she notes.

“We don’t want people to swap out glamorous light fixtures,” she says. “We want the house to look as amazing as possible. We simply need to exclude that item from the contract so the buyer is clear that the seller is taking that item. You don’t want people to be surprised.”

A surprising discovery can occur at a property if sellers have taken something unexpected with them, says Lowes. “Sometimes, I shake my head: shower curtain rods, toilet paper holders, nickel-and-dime items,” Lowes says. “It’s not worth fighting over them.”

Points of confusion can be different at rural or cottage properties, Lowes adds. Some people may not realize the value of specific chattels, he notes. Tractors, for example, can be more expensive than cars.

“On a farm, you can have controversy about gates,” Lowes notes. “They just lift off, but they’re expensive. There can also be disagreements about crops; a farmer has the right to harvest them after the closing, but it’s important to put that into the contract as an exclusion. Anything of value to the sellers that they plan to take with them should be mentioned in the contract, particularly if the item could be seen as a fixture that should stay.”

He tells of a rural property where the seller and the buyer disagreed over a donkey. “The buyers wanted it, but the sellers said it was a pet, and in the end, the deal didn’t come together because of it.”

When dealing with cottages, something that is often overlooked in discussions is the dock, Reljic adds. “Back in the day, docks were very simple, but today they can be elaborate, expensive systems costing $40,000 or more. I always try to be as specific as possible in the contract.”

Radomsky, the lawyer, agrees with that approach. “When in doubt, spell it out. Specify in the forms anything that might be a point of contention or confusion. For example, I may suggest that my buyer clients insert ‘Built-in dishwasher’ in the Chattels Included section of the APS. By specifying the item as included in the sale, everyone is clear about that and you don’t have arguments later about whether it was attached or not.”

“Put it in writing to make it as clear as possible what stays and what goes.”

How to Deal with Issues Surrounding Chattels and Fixtures:
  • Clearly define fixtures and chattels to your clients.
  • Ensure that your clients understand that the details in writing are what ultimately count.
  • Specify included chattels and excluded fixtures in the APS with as much detail as possible
  • Sort out all issues before your clients sign the paperwork.
  • Ask clients questions about chattels and fixtures by email so that you have information in writing and there can be no confusion afterward.

Story by Elaine Smith

Sources: Heather Hadden, Rennie Lowes, Lou Radomsky, Stan Reljic

Image © Flickr - ActiveSteve

Editorial Policy: The REALTOR® EDGE newsletter is produced 11 times a year by the Ontario Real Estate Association. The newsletter aims to provide practical and useful news and information about the real estate industry to members of the association. The opinions expressed in the newsletter are not necessarily those of the publisher. The newsletter welcomes submissions from the real estate community, including letters to the editor, opinion pieces, events and news. The newsletter reserves the right to edit, based on space restrictions and/or suitability, and/or to refuse submitted material for inclusion in the newsletter without reason. All rights reserved. Reproduction in whole or in part without the express written permission of the publisher, OREA, is prohibited. Contents are copyright of the Ontario Real Estate Association.

Editor: Mary Ann Gratton

Contributors to this issue: Elaine Smith, Merv Burgard, Mary Ann Gratton

Web Editor: Shade Lapite

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