Disappearing Doors: The Nebraska Supreme Court's Distinction between "Fixtures" and "Trade Fixtures"

Commercial real estate leases typically contain language allowing the tenant to remove its trade fixtures at the expiration of the lease term, so long as the tenant repairs any damage caused by such removal. In many situations there is little disagreement between the landlord and tenant regarding what items of property are trade fixtures, as opposed to fixtures that are deemed to have become part of the real estate. For example, most landlords would readily agree that a commercial oven installed by a restaurant tenant within the premises is a trade fixture, and as such the tenant should have the right to remove the oven at the end of the lease term. Likewise, most tenants would agree that flooring finishes installed by the tenant within the premises, such as carpeting and tile, are fixtures that may not be removed when the lease terminates. However, disputes frequently arise regarding a tenant’s right to remove less obvious items of personal property that were installed by the tenant during the lease term.

The Nebraska Supreme Court recently addressed the distinction between fixtures and trade fixtures in Griffith v. Drew’s LLC, 290 Neb. 508 (2015). In that case, the plaintiff had purchased a commercial building from the defendant and a dispute arose as to whether the interior doors of the building were fixtures that were included in the sale of the building. The defendant’s wife operated a dental practice as a tenant of the building prior to the sale. In connection with her dental practice, she installed commercial-grade fire rated doors throughout the interior of the premises, and she removed the doors shortly before the closing of the sale. The buyer sued the seller claiming that the doors were fixtures that were part of the real estate, and the seller claimed that the doors were trade fixtures that were properly removed by the tenant at the end of her lease.

In determining whether the doors were fixtures or trade fixtures, the Nebraska Supreme Court established a three-part test:

  • Whether the item of personal property had actually been annexed to the real estate or something appurtenant to the real estate.
  • The appropriation of the item of personal property to the use or purpose of that part of the real estate to which it is connected (focusing on whether the item of personal property is specific to the type of business being conducted on the real estate, or whether the item of personal property would generally be found on real estate and have value to a hypothetical purchaser of the real estate).
  • Whether the party making the annexation intended to make the item of personal property a permanent part of the real estate, which intention should be inferred from (a) the nature of the item of personal property, (b) the relation and situation of the party making the annexation, (c) the structure or mode of annexation, and (d) the purpose or use for which the annexation has been made.

In applying this three-part test, the Court concluded that the doors were fixtures that had become part of the real estate, rather than trade fixtures that could be removed by the former tenant, and should have been included in the plaintiff’s purchase of the building. A few notable reasons for that conclusion include the following:

  • The doors were attached to doorframes, which were then affixed to the building.
  • Nebraska courts have previously stated that doors are a part of the real estate, even though they are often hung but not fastened to a building.
  • The doors were reasonably necessary for the purposes for which the real estate was being used—they served to divide the interior of the building and enclose the rooms, supplying privacy.
  • While the fire doors were required in the building under a building code applicable to new health care occupancies, in general doors are not specific to a dental practice and are the type of property that would be useful to any purchaser of the realty.
  • Given the relationship between tenant and landlord, the former tenant likely intended to make the doors a permanent part of the real estate.

It may be difficult to predict the results of the three-part test when applied to other items of personal property, or even other doors for that matter. However, a landlord and tenant, or a seller and purchaser, can avoid potential disputes by addressing specific fixtures in their written agreements.

Whatever your interest in commercial real estate and the fixtures or trade fixtures attached thereto, the Real Estate attorneys of Woods Aitken are available to assist you in protecting those interests.