Tenant Rights – Chattels or Fixtures?

Tenant farmers may by lease attempt to protect their rights to return of the means of production upon termination of the lease.  Where they purport to assign and later re-acquire these rights in contravention of the lease, can they continue to assert these rights?

The British Columbia Court of Appeal has recently clarified the legal principles to be applied in interpreting a tenant’s rights in these circumstances.  In the case under consideration, the tenants had sued the landlord property owner for damages for refusing to permit them to remove blueberry plants which they  had planted on the property pursuant to the authority provided by their lease.  The lease expressly provided that, upon the termination of the lease, the tenants were to clear the planted blueberry bushes from the property and re-plant the property to timothy grass.  Although the lease also precluded the tenants from assigning or sub-leasing their interest in the property, the tenants had purported to assign the lease to a third party under identical terms and had then purported to re-acquire these same rights by further assignment.

At trial, the trial judge held that, although the original lease had been surrendered upon its purported assignment, the stipulation that the blueberry plants were to be removed upon termination rendered the blueberry bushes chattels, not fixtures, and awarded the plaintiff tenants $90,000 in damages for conversion.  In considering the landlord defendant’s appeal from this decision, the appellate court commented:

 “I agree with the judge that the intention of the parties expressed in clause 8 of the lease was that (the plaintiff tenant) was to reclaim the blueberry plants on termination of the lease.  I do not agree that this made the blueberry plants chattels …

“Removal of the plants at the end of the lease may return them to their status as chattels.  It does not mean that they were not fixtures prior to that time.  In my view, the plants clearly were affixed to the land.  The purpose or object of the annexation was to grow the plants so they could yield marketable crops of blueberries”.

In allowing the appeal and setting aside the trial judgement, the appellate court held that although, under the terms of the lease, the tenants had the right to remove the blueberry plants at the end of the lease, this right had terminated upon their assignment of the lease contrary to its provisions and could not be restored as against the defendant landlord upon the purported reassignment of these rights.  The court stated:

“The [plaintiff tenants] contend that clause 9 is not applicable because [the purported assignee] owned the blueberry plants and assigned them to the [plaintiff tenants].  This proposition is premised on the plants always being chattels.  I have concluded they were not, subject to the right of the tenant to sever them from the land and thereby convert them back to their status as chattels.  [The assignee] did not sever them; any right the [plaintiff tenants] might have had to do so would flow from the provisions of the [assigned lease], but they did not have rights under that lease.

“If the [defendant landlord] converted property by preventing the removal of the blueberry plants, it was the property of [the assignee], not that of the [plaintiff tenants].”

While tenant farmers may properly protect their rights to return of means of production upon the termination of their lease, such provision may not prevent the means of production from becoming fixtures.  In the event of subsequent surrender of the lease by the tenant resulting from assignment contrary to its provisions, entitlement to fixtures runs with the land and the tenant’s entitlement will terminate.

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