Trade Fixtures - Re: Commercial Tenancy

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

[32] Fixtures are assets that are sufficiently affixed to real property such that they are considered permanent in nature and part of the land. Whether fixtures become part of the land depends on the degree and object of annexation to the land: Stack v. T. Eaton Co. (1902), 4 O.L.R. 335 (Div. Ct.), 1902 CarswellOnt 399. This case concerns the fate of fixtures upon termination of a lease. The general rule is that fixtures remain with the land following the end of a tenancy; but not all fixtures fall within this rule.

[33] Trade fixtures are assets that are affixed to leased premises by a tenant for trade or commercial purposes. Courts have consistently held that tenants are presumptively allowed to remove trade fixtures at the end of a tenancy so long as the removal does not materially damage the premises: 859587 Ontario Ltd. v. Starmark Property Management Ltd. (1997), 1997 CanLII 12153 (ON SC), 34 O.R. (3d) 43, at p. 54 (Gen. Div.), 1997 CarswellOnt 2308, at para. 31, affirmed (1998), 1998 CanLII 7138 (ON CA), 40 O.R. (3d) 481 (C.A.), 1998 CarswellOnt 2937; Caledonia Service Station Inc. v. Cango Inc., 2011 ONCA 184, at para. 14; Newfoundland and Labrador Housing Corp. v. Humby, 2013 NLCA 7 per Rowe J.A. (as he then was), at paras. 22-27. This exception – that trade fixtures do not remain with the land post-tenancy – has a long history in the common law: Warner v. Don (1896), 1896 CanLII 67 (SCC), 26 S.C.R. 388, at pp. 391-92, 1896 CarswellNS 102, at para. 8; Stack, at p. 338; and Richardson v. Equitable Fire Insurance Co., 1953 CanLII 159 (ON CA), [1953] 3 D.L.R. 583, at p. 586 (Ont. C.A.), 1953 CarswellOnt 67, at para. 8.

[34] Importantly, as this court held in Bank of Nova Scotia v. Mitz (1979), 1979 CanLII 1789 (ON CA), 106 D.L.R. (3d) 534, at p. 538 (Ont. C.A.), 1979 CarswellOnt 741, at para. 11, there is a distinction in the analysis depending on whether the attempted removal of the disputed asset occurs in the context of a lease versus the sale of real property. In the former case, there appears to be a presumption that a tenant would not have an objective intent to affix an asset on a permanent basis such that it would become part of the real property at the end of the lease: Bank of Nova Scotia, at pp. 538-39. In other words, the object of annexation is presumptively not one of permanence.

[35] The jurisprudence demonstrates that the determination of whether an asset is a fixture or trade fixture upon termination of a lease is highly fact specific. For example, in Webb v. Frank Bevis Ltd., [1940] 1 All E.R. 247 (E.W.C.A.), the English Court of Appeal held that a 6,750 square foot shed was a trade fixture and removable by the tenant at the end of the lease. The shed in that case was covered with a corrugated iron roof that rested on wooden posts. The wooden posts, in turn, were affixed to a concrete floor – but not embedded in the concrete. The court held that the shed could be taken apart without damage to the leased premises and was a trade fixture. By contrast, the concrete floor was not a trade fixture since it could not be removed without damage to the leased premises.

[46] In any event, the appellant cannot rely entirely on s. 41 of the CTA because this case involves trade fixtures. This court made clear that trade fixtures, while they remain affixed to the land, are never subject to the landlord’s remedy of distress in 859587 Ontario Ltd. v. Starmark Property Management Ltd. (1998), 1998 CanLII 7138 (ON CA), 40 O.R. (3d) 481, at pp. 487-88 (C.A.), 1998 CarswellOnt 2937, at paras. 13-15, affirming (1997), 1997 CanLII 12153 (ON SC), 34 O.R. (3d) 43, at p. 54 (Gen. Div.), 1997 CarswellOnt 2308. As Doherty J.A. explained in Starmark Property, at para. 9, this is because “distraint runs against the tenant’s property found on the land and not against the land itself”. Trade fixtures may only be distrained when they have been severed from the land and resume their nature as chattels. The ratio from Starmark Property alone disposes of the appellant’s argument that it was entitled to distrain the Structural Assets.

[47] The trial judge did not err in concluding the appellant engaged in an unlawful distraint in this case.