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Fixtures, improvements and commercial leases

On Behalf of | Jun 23, 2021 | Real Estate Law |

The terms of a commercial lease typically outline which fixtures belong to a tenant and those which belong to a property owner. As noted by Millionacres, trade fixtures installed for operating a business, such as signage and display cases, belong to the tenant.

When a lease agreement ends, tenants must remove their trade fixtures. A landlord may otherwise acquire abandoned property. If the lease allows, a landlord may seek reimbursement for the cost of removing or disposing of any trade fixtures that a tenant abandons or leaves behind.

Fixtures attached or installed by a landlord

To stay competitive, property owners may attach or install fixtures to attract profitable commercial tenants. Attached fixtures may include items such as industrial lighting, and can consist of the screws or hardware used to secure an attachment to the property. A landlord generally owns the attached fixtures and may seek reimbursement from a tenant who destroys or removes them.

To avoid end-of-term issues, a lease agreement may describe a landlord’s installed integral fixtures. A rental unit, for example, may include a large kitchen with state-of-the-art ovens used by restaurant owners. Terms could outline how a tenant may repair or modify an installed fixture and when a property owner may seek damages.

Improvements made by a tenant

Unlike fixtures, improvements made to a rental unit could increase the value of a property. As described by, some commercial property owners may offer tenants an allowance for making improvements. When a tenant makes an improvement to the property, a landlord may also provide a credit toward future rent payments. The credit amount, however, may involve some negotiation and require inclusion in a commercial lease.

Fixtures can include chattel and removable equipment that belong to tenants who take them after leaving. Improvements, on the other hand, typically stay with the property and can increase its value.