How to know what's included or excluded from home sale

This time of the year is “prime time” for house and condo sales. More residences are sold between April and July than at any other time of the year. Thanks to the current low mortgage interest rates, 2004 promises to be a near-record year for home sales.

Whether you are a home buyer or seller, it pays to know what is included or excluded from your sale. Can the seller remove the dining room chandelier? Should the buyer presume the living room drapes are included in the sales price? What about the rose bushes in the garden?

Purchase Bob Bruss reports online.

THE VITAL “LAW OF FIXTURES” RULES. The answers to these important home sales questions are determined by the “law of fixtures.”

The basic fixture rule is quite simple, but the implementation is often difficult. Even experienced real estate agents often get confused.

A “fixture” is personal property that, by means of permanent physical attachment to the land or structure, such as with bolts, nails, screws, cement, glue or other attachment method, is converted to real property.

To illustrate, suppose a home’s living room has beautiful drapes that the buyer loves. Unless the sales contract specifies the “window coverings” or drapes are included in the sales price, the seller is entitled to remove the drapes. However, the seller must leave the drapery hardware that is bolted or screwed to the structure.

Another example: Years ago in the town where I live, a house with a beautiful yard filled with rose bushes was sold to a rose lover. A major reason for purchase of the home was the extensive collection of rose bushes. Imagine the buyer’s shock on the day after the sale closed to discover the seller removed all the rose bushes.

Although plants growing in the ground are considered attached to the property by roots, these rose bushes were in large pots which were hidden by the topsoil. Legally, the seller was therefore entitled to remove the dozens of rose bushes that remained removable personal property in their containers.

HOW HOME BUYERS AND SELLERS CAN AVOID FIXTURE TROUBLE. Experienced real estate agents advise their home sellers, before showing the residence to prospective buyers, to remove any attached fixture that the seller doesn’t want included in the sale. The classic example is a dining room chandelier.

Some naïve sellers hang a little “not included” tag from their chandeliers. That is the worst thing a seller can do. It is like waiving a red flag in the buyer’s face. You can be sure a serious buyer will then specify in their purchase offer “Dining room chandelier to be included in the sales price.”

Instead, the seller should remove the chandelier and install an acceptable replacement so the buyer never sees the seller’s beautiful chandelier.

Equally important, the sales contract should specify which fixture items are included or excluded from the sales price. The general rule is unless an item is listed and if it can be removed without damage to the structure, it is personal property that belongs to the seller.

For example, a washer and dryer are personal property that the home seller is entitled to remove (unless the buyer specifically includes those items in the sales contract purchase offer).

However, built-in appliances are considered fixtures that are automatically included in the home sale unless they are specifically excluded.

To illustrate, a kitchen cook-top range is a built-in fixture. A built-in dishwasher and microwave are also considered fixtures. However, a free-standing refrigerator remains personal property, while a refrigerator that is built-in is a fixture.

WHAT TO EXPECT IN A WELL-WRITTEN SALES CONTRACT. To prevent misunderstandings, a well-written purchase offer might read: “All existing fixtures and fittings that are attached to the property are (if owned by the seller and unless excluded below) included in the purchase price and shall be transferred free of liens. These shall be deemed to include, but are not limited to, the following: existing electrical, lighting, plumbing and heating fixtures, fireplace inserts and attached fireplace equipment, solar systems, built-in appliances, screens, awnings, shutters, window coverings, attached floor coverings, television antennas, satellite dishes and related equipment, private integrated telephone systems, air coolers/conditioners, pool-spa equipment, water softeners, security systems/alarms, keys to all exterior and interior locks, garage door openers/remote controls, mailbox, and in-ground landscaping.”

If the buyer wants to include any non-fixture personal property in the sales price, such as patio furniture, free-standing stove, refrigerator, washer, dryer, and entertainment equipment, they should be specified in the purchase offer. Otherwise, they are not included in the sale because they are not real property fixtures.

If the seller wants to exclude any fixtures, the seller must specifically exclude them by making a counteroffer to the buyer. Otherwise, they are automatically included.

FIVE FIXTURE RULES IF A COURT MUST DECIDE. If a dispute arises, usually when the seller removes an item which the buyer expected to be left as a fixture, courts generally apply five basic rules of fixtures:

1–METHOD OF ATTACHMENT. The most important rule for determining if a personal property item has become a fixture that is included in the home sale is the method of attachment to the land or building. If it is nailed, bolted, glued, wired, built-in, or cemented, then it is probably a fixture that is included in the sales price (unless excluded in the sales contract).

When an item can be removed without damaging the structure, such as by unhooking hanging drapes from a rod, unscrewing a light bulb, or unplugging a refrigerator, it is personal property that the seller can remove.

Weight of the item doesn’t matter. To illustrate, a heavy above-ground swimming pool is removable personal property (unless surrounded by a permanent structure, thus making it a fixture that is real property).

Window coverings are often controversial. Drapery rods are clearly fixtures (included in the sales price) because they are screwed into the structure. But home sellers often argue drapes are hung by hooks, thus making them personal property that the seller can remove. But home buyers reply, especially if the drapes were custom-designed to fit the structure, they have become fixtures that are included in the sales price.

2–AGREEMENT OF THE PARTIES. Inclusion or exclusion of fixtures and questionable items is negotiable. For this reason, a well-written sales contract will clearly show the agreement of the buyer and seller when the negotiations took place.

3–INTENT OF THE BUYER AND SELLER. If the written sales contract is inconclusive, other evidence can become important to determine if an item is included in a home sale.

For example, if the seller’s multiple listing service (MLS) description of the home says “delightful kitchen with new appliances” that indicates the seller intends to include all the kitchen appliances in the sales price. An MLS listing stating “outdoor spa” would indicate the built-in hot tub is included.

4–ADAPTABILITY TO THE PROPERTY USE. Built-in components which are adapted to the residence are considered to be fixtures that are included in the sales price.

To illustrate, my den has two stereo speakers built-in to the wood cabinets and book shelves. When I purchased my home, nothing was said in the sales contract about the stereo system. The seller left the built-in speakers but removed the other components, which were easy to unplug. I promptly purchased a new up-to-date system that uses the quality speakers.

5–RELATIONSHIP OF THE PARTIES. If a lawsuit develops to determine if an item is a fixture included in the sale, courts usually favor (a) buyer over seller, (b) tenant over landlord, and (c) lender over borrower.

THE TRADE FIXTURE EXCEPTION. When a property is used for commercial business purposes, the trade fixture exception applies. It says a business owner is entitled to remove equipment used in operating the business, such as restaurant booths, outdoor business signs, restaurant kitchen equipment, bank vault, and display cabinets. But the business tenant must restore the property to its pre-lease original condition.

A similar situation occurs when improvements are made to the wrong property. For example, if a mistaken improver builds a fence on a neighbor’s property rather than on the correct side of the boundary, the fence can be removed and the neighbor’s premises restored without liability to the adjoining property owner. More details on the law of fixtures are available from a local real estate attorney.