Last week the Supreme Court published their judgment in the long running landlord and tenant dispute between RGRE Grafton Limited (the “Landlord”) and Bewley’s Café Grafton Street Limited (the “Tenant”) and Bewley’s Limited in relation to the ownership of six 1920s Harry Clarke stained glass works (the “Works”) in Bewley’s café, Grafton Street. The Supreme Court found that the Works were part and parcel of the premises and were therefore the property of the Landlord.
Irish Courts have spent considerable time over the past three years considering whether the Works should be classified as part of the fabric of a building or as fixtures, and if so, whether they were landlord’s or tenant’s fixtures. Varying conflicting conclusions have been reached by the Courts demonstrating the complexities of this area of landlord and tenant law and highlighting the importance of accurately documenting the nature and ownership of items in a leased property.
Modern commercial leases rarely deal with Harry Clarke artworks but the principles in this case apply equally to items we see every day in leases such as custom shopfront signage, permanent flooring changes, integrated ceiling lighting or mezzanine floors. It is vital that all parties understand the nature of such items and are in agreement on their ownership and removal rights. This needs to be adequately documented in the lease to avoid potential conflict.
The facts
The Works were installed in Bewley’s café in 1928, months after the premises was completed and the café opened. The issue of ownership came to light in 2020 when the Tenant sought to transfer its interest in the Works to a related company Bewley’s Limited which in turn licensed the Tenant to continue to use the Works in the café.
The Landlord contended that the Works comprised windows that formed part and parcel of the premises and were therefore owned by the Landlord. The Tenant and Bewley’s Limited disputed this and argued the Works were decorative and ornamental artworks that constituted tenant fixtures.
It was decided that the Works fell into two distinct categories;
- “four orders works” (four of the stained glass works) – there was quite clear evidence that these originally sat directly in the window openings in the external western wall of the café premises; and
- “swan yard works” (two of the stained glass works) – currently located on an internal wall, with a lack of evidence on their original position. The Courts heard substantial evidence that these works may have been installed as the inner layer of a double fenestration system and had originally been inserted parallel to existing windows.
The issues to be determined
The High Court, Court of Appeal and the Supreme Court considered the same issues with varying conclusions;
- were the Works part and parcel of the premises and therefore the property of the Landlord to be enjoyed by the Tenant for the duration of their lease?
- if the Works were not part and parcel of the premises, were they fixtures?
- if they were fixtures, did they belong to the Landlord or Tenant?
The judgments
Key Takeaways for modern leasing
- The timing of installation is not necessarily determinative – Items installed after the construction of a premises will not necessarily be classified as fixtures and could be found to be part and parcel of the landlord’s premises.
The Supreme Court noted that it was of no significance that the Works were not ready for installation when the café opened. They had been commissioned before the lease was granted and the café opened and it was clear that it had always been the intention that they would be installed in the premises.
- Site specific design points to landlord ownership – The fact that the Works were “site-specific” appeared to the Supreme Court to run counter to any suggestion that they were installed solely for the tenant’s benefit.
- The burden of proof for payment is critical – As the Works were found to be part of the structure of the premises they could not be Tenant fixtures and could not be removed by the Tenant and that was so regardless of who paid for the windows. If it was determined that the Works were in fact fixtures, they could not have been Tenant fixtures unless they were paid for by the Tenant. The obligation was on the Tenant to show proof of payment which they failed to do.
- Two-part annexation test for fixtures – The Courts reaffirmed the principle that in examining whether an item has become a fixture, the factors to consider are the degree of annexation of the item to the premises and, more crucially, the object or purpose of the annexation. In this dispute, were the works installed as windows to weather the landlord’s premises or were they installed as ornamental works of art for the enjoyment of the tenant’s café customers?
The Supreme Court did not have to consider this matter in detail as they found the Works were all part and parcel of the premises and therefore the Landlord’s property, however they gave an indication of their view on the matter. The Supreme Court would not have been persuaded that the windows were installed for the temporary purpose of the tenant’s trade so as to render them a tenant’s fixture. The Supreme Court felt although the evidence was limited, it indicated that the Works were designed and installed for the permanent and substantial improvement of the premises and were therefore more likely to be a landlord’s fixture.
- Labels are not determinative – It was noted by the Courts that the Works had been referred to as “windows” in various places including in Harry Clarke’s contemporaneous correspondence. While the Supreme Court did not find this to be determinative, it was relevant.
- Effect of yield up provisions – The Tenant had been in occupation of the café under various leases since 1928 and had never parted with possession. The yield up provision in the original lease included an obligation to deliver up tenant’s fixtures but the Courts found this provision to be largely irrelevant as the Tenant never actually yielded up the property.
- Ease of removal without damage is not determinative – The fact items can be removed without damage to themselves or the property will not necessarily mean they are fixtures. None of the Courts were overly persuaded by the fact the four orders works were removed and stored elsewhere for safekeeping during the second world war without any consequent damage to the Works or the premises.
It is important to consider whether items in a leased property should be classified as part of the fabric of a building or landlord’s or tenant’s fixtures at the outset of a transaction. This should be accurately detailed in lease documentation to ensure that all parties clearly understand who the items belong to and what rights each party has over such items, including who has the right to remove them at the end of the lease term. In some cases it can be advisable to include an inventory of the items.
Contact us
For more information regarding anything discussed in this article, please contact Hilda Wrixon, Rachel Turner or a member of the Commercial Real Estate team or your usual contact at Matheson.
With thanks to Stephanie Dunne for contributing to this article.