Caveat Emptor – Let the Buyer BewareJuly 26, 2010
Value of a Written AgreementOctober 18, 2010
The sale and purchase of a residence in Medicine Hat typically will involve a licenced realtor who, in turn, will rely on a Standard Residential Real Estate Purchase Contract that has been developed and approved by the Alberta Real Estate Association. The contract will evidence the agreement between the seller and buyer. The contract will identify the three Ps of any residential sale/purchase contract – the parties, the price and the property.
As with any contract, there are numerous terms or conditions which should be considered or examined and which often give rise to some interesting and, at times, conflicting legal issues.
Paragraph 1.1 of the Standard Residential Real Estate Purchase Contract identifies that the property being purchased is the “land, buildings, attached goods (unless excluded), and unattached goods” located at the address shown.
Paragraphs 1.3 and 1.4 of the contract, when read together, indicate that all attached goods (fixtures) are included in the purchase price unless specifically excepted, and that no unattached goods (chattels) are included in the purchase price unless specifically identified. Often, we then see a long list of items identified as chattels, which purportedly form part of the property being purchased. Here is an example of a list of items identified under paragraph 1.3 found in a recent contract: “central air conditioner, ceiling fans, dishwasher, washer, dryer, fridge, stove, H/fan, garbage disposal unit, microwave, reverse osmosis system, water softener, blinds and window coverings, built-in vacuum and attachments, two garage door openers and two controls, Jacuzzi tub, heater in garage, two gas fireplaces”.
The legal issue then becomes “What is a fixture?” or “In what circumstances will a chattel be a fixture and included in the purchase price, and when will a fixture not be a fixture and not be included in the purchase price?” What right, if any, does a seller have to remove a fixture after the contract has been signed?
The basic principle of real estate law is that whatever is affixed to the land becomes part of the land and is a fixture and, as between seller and buyer of the land, all fixtures pass with the land when the land is sold. Once an item is determined to be a fixture, the seller has no right to remove the item after the contract has been signed.
The case law over the years have developed various guiding principles or general rules in establishing what is a fixture.
Articles attached to the land or building by their own weight are not considered to be part of the land and therefore not a fixture, unless it can be shown that they were intended to be part of the land.
Articles affixed to the land or building even slightly are considered to be part of the land, unless the circumstances are such that they were intended to remain as chattels.
The degree of annexation and the purpose or object of such annexation will be examined to determine whether there should be a change in character of the item. In other words, the greater degree of annexation or fixation, the greater likelihood that it will be considered a fixture. For example, if damage were to occur to the land or building as a result of its removal, then the greater likelihood is that it would be considered or deemed to be a fixture.
Slight, occasional or temporary annexation or fixation of a chattel to the land may not necessarily result in it being deemed a fixture. For this situation, there is another general rule. If affixed to the land for the better use and enjoyment of the chattel, it will remain a chattel. If it is affixed to the land or building for the better use and enjoyment of the land or building, it is a fixture. For example, a pool table in a family or rec room may be affixed to the floor in order to stabilize it. Arguably, it remains a chattel as it is attached to the land for the better use and enjoyment of the pool table. What about a built-in dishwasher or microwave?
In determining what is or what is not included in the purchase price, consideration should be given to these guiding principles. Items, such as a fridge, stove or washer and dryer, are clearly chattels and should be specifically identified in a contract, if included as part of the purchase price. Other items may not be as clear. The best advice is to ask, and if there is any doubt, then it would be advisable to specifically identify the item in the contract, in order to avoid confusion or a dispute later on when the time comes to complete the deal.