Fixtures and Chattels WHAT’S THE DIFFERNCE! They differ in the way they impact the seller and the buyer, as well as two ways to disclose them using Forms.
What are Fixtures?
A Fixture is a component that is permanently fixed to the real property. Examples range from a water tank to a furnace.
Fixtures often have rental costs or contracts with the existing homeowner that could carry over to the new homeowner if the property is sold.
How Can a Fixture Impact the Seller and Buyer?
The main impact Fixtures could have on a transaction is the financial obligation they come with.
Scenario: You are representing a seller and discover the furnace (the Fixture) has been permanently fixed to the home for the last two years and continues to remain on a contract with rental costs.
First, you’ll want to clarify two pieces of crucial information about the furnace:
1. Is there a payout privilege for the furnace? 2. If the furnace does not have a payout privilege, will the buyer assume the rent upon possession of the home?
If there is no payout privilege, you must ensure this is made known to the buyer in light of the rental costs they would face after closing.
Alternatively, if the buyer does not assume the rental, the seller must also be informed and can be advised of a possible payout option for the furnace.
What are Chattels?
Chattels are possessions that can be removed without causing destruction to the property, with examples that range from window coverings to ceiling fans.
Chattels do not have associated rental costs and can also be excluded from the purchase price, which also marks the key difference between Chattels and Fixtures.
Two Ways to Disclose Fixtures and Chattels
Disclosing Fixtures and Chattels is easy, and you have the resources to disclose them using Forms available through WEBFormsR:
Form 111 – Agreement of Purchase and Sale
Clause No. 4 and Clause No. 5 allow you to disclose the Chattels or Fixtures that are included or excluded in the sale of a property.
You’ll be able to easily prevent confusion and disclose what obligations your clients may have related to a Fixture, as well as avoid disappointing the buyer by indicating what Chattels will be removed after closing.
Form 828 – Residential Information Checklist – Rental or Lease – Fixture(s)/Chattel(s) Included
Form 828 is not a mandatory form; however, it helps to protect you, and using it will add value to the services you provide.
This form features a checklist format, allowing you to inform the buyer in writing of any Fixtures or Chattels that are owned or rented, as well as their associated costs and any additional information surrounding the contract.
If you are representing a seller, you can also use this form as a reference point to ensure transparency is met with your client.