A tenant’s right to remove trade fixtures during the course of a lease had been ousted by the provisions of its lease.

Peel Land & Property (Ports No 3) Ltd v TS Sheerness Steel Ltd [2014] EWCA Civ 100; [2014] PLSCS 53 concerned the Sheerness Steel Works in Kent, which were let to Sheerness Iron & Steel Ltd for a term of 125 years in 1971. The lease obliged the tenant to erect and equip a substantial steelmaking plant and rolling mill and to yield up the premises at the end of the term, together with any additions and improvements “and all fixtures and fittings of every kind in or upon the said premises… except tenant’s or trade fixtures”. TS Sheerness Steel Ltd took an assignment of the lease in 2012 and decided to sell the contents. The landlord claimed legal and beneficial ownership of the plant and machinery and sought an order restraining the tenant from selling or removing it from the property. The trial judge decided that most of the items were either chattels, or trade fixtures, and that the tenant was entitled to remove them. The landlord did not challenge the way in which the trial judge had classified the items. However, it did attack the judge’s ruling that the tenant was entitled to remove trade fixtures during the course of the lease because the tenant’s covenant to install fixtures did not, of itself, prevent the tenant from removing them and the provisions of the lease were insufficiently clear to override the tenant’s right to remove trade fixtures whenever it chose. The landlord drew the Court of Appeal’s attention to the tenant’s covenant not to alter the premises, except in connection with their use for any industrial purpose that it had approved, and argued that the covenant was sufficiently clear to oust the tenant’s right to remove trade fixtures. The Court of Appeal agreed with the landlord and upheld its claim. It began by saying that, if it were to conclude that the parties had intended to oust the tenant’s right to remove trade fixtures, then that would be the effect of the lease. If it was unsure about the parties’ intentions, or the lease was ambiguous, the tenant would retain the right to remove its fixtures if it chose. The court reminded the tenant that the fixtures had become a part of the premises and decided that their removal would alter the premises in a manner that was not connected to a permitted use. It gave short shrift to the tenant’s reliance on other instances in the lease where the parties had referred separately to the premises and fixtures and fittings (which, the tenant argued, showed that the covenant prohibiting alterations to the premises was not as wide in its effect as the landlord claimed). Their Lordships decided that it would be commercially unrealistic to adopt the tenant’s interpretation of the lease and were in no doubt that the prohibition against alterations to the premises was to be widely interpreted. Tenants would be well-advised to check their leases carefully following this decision, especially as the court accepted that its interpretation would prevent the tenant from preparing for the end of the lease by removing its trade fixtures from the premises – even though it was not obliged to surrender its tenant’s and trade fixtures up to the landlord when the term ended. Allyson Colby is a property law consultant