California Real Estate Broker ExaminationTransfer of PropertyHard
A property owner has leased a commercial building to a tenant. The tenant installs new, specialized equipment that is essential for their business operations and intends to remove it at the end of the lease term. This equipment would generally be classified as:
- AAppurtenance
- BTrade Fixture
- CReal Property
- DFixture
Show answer & explanationAnswer & explanation
Correct answer: B. Trade Fixture
Trade fixtures are items of personal property that are attached to real property by a tenant and are essential for the tenant's business operation. They are generally considered personal property of the tenant and can be removed at the end of the lease, provided no damage occurs to the premises.
Why the other options are wrong
- A. An Appurtenance is a right or privilege that 'runs with the land' (e.g., an easement), not an item of equipment.
- C. Real Property refers to land and anything permanently attached to it, which trade fixtures are not intended to be.
- D. A Fixture is personal property that has been attached to real property, becoming real property. However, trade fixtures are a specific exception.
Trade Fixture
An item of personal property attached to leased real property by a tenant for use in a trade or business. It is generally considered personal property of the tenant and may be removed before the lease expires.
- Installed by a tenant (lessee)
- Essential for the tenant's business or trade
- Remains personal property of the tenant
- Must be removed before lease expiration without damaging the premises
Memory trick: Trade Fixture: 'T' for 'Tenant's Tools' for their 'Trade'.