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Trade Fixtures

DEFINITION

Equipment attached to real property for the purpose of conducting trade and/or business. Can be removed following the expiration of the tenant’s lease. If removal of the fixture damages the property, the tenant is liable for damages.

EXPLANATION

A trade fixture is an item used by a lessee on a landlord’s property for the purpose of a trade or business. The trade fixture is the personal property of the tenant, and can be moved or removed at his or her discretion as long as the removal does not damage the property. (In the case that the equipment does definitively damage the property, the tenant is responsible for repairing the damage.)

The term trade fixture is often confused with fixture. Although both start out as personal property, a fixture becomes real property, whereas a trade fixture remains personal property

Generally, trade fixtures are items relating to the production of a manufacturing, trade, or agricultural business. Examples of trade fixtures include: counters, shelves, attached furniture, machinery, signs, telephone lines, and others. As a vital component of a tenant’s business, trade fixtures cannot be removed from the property without cause.

Civil Code Section 1019 does restrict a tenant’s right to trade fixtures, however, when such fixtures becomes an essential component of the property.

Unless otherwise agreed to by the landlord and tenant, a trade fixture must be removed by the expiration date of the lease. In the event that the tenant does not remove the trade fixture, the property owner has the right to possess it. For example, a landlord may repossess a trade fixture if a tenant’s business goes bankrupt and he or she doesn’t have the money to remove the trade fixture from the landlord’s property.

However, courts have determined that a tenant must be allowed a reasonable period of time to complete the removal, particularly as some removals require third party servicers. Typically, courts will side with tenants unless the removal of a trade fixture negatively affects the subject property.

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