December 2013

Solar Panels - fixtures or fittings - listed in a Contract of Sale?

When buying a new property it is essential to know exactly what is being sold and what is being bought. Identify the subject matter of the sale, is it:

  • land;
  • land and any building(s);
  • land and any fixtures (described in the contract as improvements such as a shed or garage); or
  • land, fixtures and any chattels (moveable goods such as blinds, built-in wardrobes and stove)?

One problem that has recently arisen is the issue of solar panels. Vendors and purchasers should examine the subject matter of the sale carefully and identify whether there are solar panels on the property being sold. If there are solar panels, then the vendor should specify in the Contract for the Sale (Contract) whether or not they are included in the sale.

What is a fixture?

Fixtures are chattels which have become part of the land as a result of having been attached to or annexed to the land.

Fixtures vs. chattels – why is the distinction important?

As a general principle, all items attached to the land before the formation of the Contract pass to the purchaser, unless the parties agreed otherwise.

A purchaser will be able to make a claim for compensation if there is a difference between what the vendor agreed to sell and what the vendor is able to transfer or convey to the purchaser at completion.

General principles regarding fixtures

The general principle regarding fixtures is whatever is attached to the land becomes part of the land.

In determining whether an item that was once a chattel but has now become a fixture, the guiding principle is the intention of the person who affixed the item to the property. Indicators of that intention are the:

  • degree of annexation of the item; and
  • object or purpose of the annexation.

In recent times, the courts have placed less importance on the degree or mode of annexation of the item and placed greater weight on the objective intention of the annexed item.

If the intention or the main intention of the person who annexed the chattel was for the better use or enjoyment of the land, then the item is likely to be a fixture. Conversely, if the intention was for the better use or enjoyment of the item itself, then the item is likely to be a chattel.  

An intention to improve the property is easier to tell when a property owner brings the item onto the land, than when a tenant does so, as a tenant is unlikely to intend to make the item a present for the property owner.

What about solar panels – are they considered a fixture or chattel?


1.  Degree of annexation

Solar panels are attached to the roof of a house or building. Electrical wiring of the solar panels is required to connect the solar panels with the power supply of the house or building. Usually an inverter is installed near the electricity meter box which converts solar energy into energy we can use at home.

2.  Intention of installing the solar panels

Generally speaking, people who install solar panels on their roof do not intend to remove the solar panels when they sell their house.

It would also most likely be the property owner who installs the solar panels, rather than the tenant who in any event would require the authority of the property owner to install the panels.

Therefore, it is more likely that the property owner’s intention of installing solar panels is for the panels to be attached to the house and pass with the land, but vendors and purchasers should specifically deal with this to avoid any disputes.

For these reasons, it is most likely that solar panels would be a fixture and therefore should be listed in the Contract as an improvement or, at the least, as an inclusion.

Best practice

Any fixtures included in the sale should be expressly described in the Contract. In order to avoid disputes or disappointment:

a.  vendors should list and describe each item if its status as a fixture is doubtful;

b.  vendors should specify each item as being included in or excluded from the sale accurately and comprehensively; and

c.   purchasers should enquire whether the vendor has title (or only a limited title) to chattels which are leased, or are subject to a credit sale agreement, a bill of sale or charge, or are tenant’s fixtures.

Therefore, in order to avoid problems, it is best practice to specify that solar panels are an inclusion (fixture) or not in the Contract.

 

Author: Chanele Mao