Trade fixtures: Overview, definition, and example
What are trade fixtures?
Trade fixtures are items or equipment that a tenant installs in a rented or leased property for the purpose of conducting business operations. These fixtures are considered personal property and, as such, can typically be removed by the tenant at the end of the lease term. Trade fixtures differ from regular fixtures, which are considered part of the property and are typically left behind when the lease ends. Trade fixtures are usually installed by the tenant to enhance their ability to operate their business, such as machinery, shelving, display cases, or specialized equipment.
For example, a restaurant might install kitchen equipment, such as ovens or refrigerators, which are considered trade fixtures because they are essential to the operation of the restaurant and can be removed when the business relocates.
Why are trade fixtures important?
Trade fixtures are important because they allow businesses to customize their leased spaces to suit their specific operational needs. They provide flexibility for tenants, ensuring that they can remove the equipment or items they need when the lease expires or if the business moves to a new location. For landlords, understanding the difference between trade fixtures and regular fixtures is important in ensuring that tenants do not leave behind equipment that they still have legal ownership of, or that may interfere with the condition of the property.
For businesses, understanding trade fixture rules can be essential when negotiating leases, ensuring that they retain ownership and control over the equipment they install. It also prevents disputes with landlords over what can be removed or left behind at the end of the lease term.
Understanding trade fixtures through an example
Imagine a clothing store renting a retail space in a shopping center. To create a functional display and storage system for their inventory, the store installs custom shelving and display racks. These items are considered trade fixtures, as they are specifically designed to facilitate the store’s business operations. When the lease ends, the store can remove these shelves and display racks, as they are considered personal property rather than part of the building.
In another example, a dentist who rents office space installs specialized dental equipment, including chairs, x-ray machines, and cabinets for storing medical tools. These items are trade fixtures because they are specifically for the operation of the dental practice. At the end of the lease, the dentist can remove these fixtures, as long as they do not damage the property during removal.
An example of a trade fixtures clause
Here’s how a trade fixtures clause might appear in a commercial lease agreement:
“The Tenant may install and remove trade fixtures at their expense during the term of this Lease, provided that such removal does not cause material damage to the Premises. Trade fixtures, including but not limited to shelving, display cases, and machinery, are considered the Tenant’s personal property and may be removed upon termination of this Lease, subject to the condition that the Premises are restored to their original state.”
Conclusion
Trade fixtures are critical elements in commercial leasing, allowing tenants to customize their spaces for their business needs while maintaining ownership of the equipment they install. Understanding what constitutes a trade fixture versus a regular fixture can help avoid disputes between tenants and landlords, particularly regarding what can be removed at the end of a lease.
For SMB owner-managers, recognizing the importance of trade fixtures can help in negotiations and ensure that the necessary equipment for running a business can be taken with them if they relocate or terminate their lease.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.