California Real Estate Broker ExaminationPropertyMedium
A tenant is leasing a commercial space for their retail business. They have installed custom display cases, shelving, and a bolted-down counter. At the end of the lease term, which of these items can the tenant typically remove?
- AOnly items that are not permanently affixed to the structure.
- BThe display cases, shelving, and counter, as they are trade fixtures.
- CAll installed items, as they were added by the tenant.
- DNone of the items, as they have become part of the real property.
Show answer & explanationAnswer & explanation
Correct answer: B. The display cases, shelving, and counter, as they are trade fixtures.
Trade fixtures are items of personal property owned by a tenant and attached to a rented space for use in conducting a business. They remain the tenant's personal property and can be removed at the end of the lease, provided no damage is done to the premises.
Why the other options are wrong
- A. Trade fixtures, even if permanently affixed, are generally removable by the tenant.
- C. Not all tenant-installed items are removable; only trade fixtures or items agreed upon.
- D. Trade fixtures are an exception to the general rule of fixtures becoming real property.
Trade Fixtures
Articles of personal property annexed to rented commercial premises by the tenant for the purpose of carrying on a trade or business.
- Installed by a tenant for business purposes.
- Remain personal property of the tenant.
- Must be removed by the tenant before lease expiration.
- Tenant is responsible for repairing any damage caused by removal.
Memory trick: Trade Fixtures: 'T'enant's 'T'ools for 'T'rade.