Peel Land & Property (Ports No 3) v TS Sheerness Steel Limited

 

Tenant’s right to remove its plant and equipment from premises even though substantial and costly to do so.

The Message

A Tenant can remove substantial plant and equipment from premises.

The Case

In an important case for tenant’s who cease to trade, the Court has made clear the law with regard to removal of fixtures and fittings.

In 1971, a Lease for 125 years was granted for the erection of the Sheerness steel works in Kent. The tenant was liable to build and equip the steelworks so it was capable of producing at least 50,000 tons of steel products each year and it duly did so. Needless to say, the plant is very substantial, comprising furnaces, numerous cranes, water coolers, fume treatment machines, transformers and numerous other substantial items of machinery and associated pipework and ductwork.

In 2012, the steel works ceased trading and the business was sold and the Lease assigned to the currentĀ  tenant. An issue arose as to whether, if manufacturing did not recommence, the tenant could remove and sell the very valuable plant and equipment? The landlord argued it could not do so because of the terms of the Lease and also because of the very substantial nature of the plant and equipment and the way it formed part of the building. Its case was that the machinery formed part of the land and belonged to it even though it was all installed by the original tenant.

The Judge reviewed the law at some length as to removal of fixtures installed by a tenant. Essentially, all pieces of plant and equipment are tenant’s chattels to begin with but, when they become part of the structure or fabric of a building, they become fixtures and the question is whether they are landlord’s or tenant’s fixtures?

To answer this question, the Judge held that it was necessary to consider the physical extent of each item and whether it was installed for the tenant’s trade and could be removed without substantial difficulty and without serious damage to the item or the premises? If an item could be satisfactorily removed, even if it was extremely complex and/or bulky, so it was reusable elsewhere, then it was a tenant’s fixture. Accordingly, even a pre-fabricated building assembled on siteĀ  could be a tenant’s fixture.

Applying this criteria, the Judge held that most of the plant and equipment was removable. Cranes and suchlike could be unbolted or cut free without causing substantial damage to the building and the fact this would take considerable time and involve millions of pounds was not relevant. The Judge held that furnaces were still removable fixed plant even though fixed to the concrete floor. However, in the case of one particular furnace, this was not removable as it was too integrated into the building and would be substantially destroyed in the process.

The Judge did not think the terms of the Lease affected the position. The law permits removal of tenant’s fixtures even if installed pursuant to an obligation under the Lease and clear words to the contrary would be needed if a tenant was not to be able to remove its fixtures and fittings. The Judge did not think it was the commercial intention that the tenant was to fully equip the building for the benefit of the landlord as if the premises had been originally let on that basis. So the tenant can remove most of the plant and equipment if it wishes to do so.