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The Fate of Fixtures at the End of a Commercial Lease: Who Pays for Removal?

The obligation of a tenant to remove fixtures and the right of the landlord to recover the cost of removal of fixtures and attendant repairs to the property were the subject of a recent decision by Suffolk Superior Court Judge Robert Gordon in The Wilder Companies, Ltd. v. California Pizza Kitchen, Inc., 32 Mass L. Rptr. 505 (2015). 

The landlord at issue sought to recover such costs from its former tenant pursuant to the terms of the lease, alleging that the tenant breached the lease when it vacated the premises at the end of the lease term, leaving behind a substantial volume of trade fixtures. The tenant countered that the landlord was not entitled to recover the removal and repair costs because the landlord had not complied with the terms of the contract that required it to give the tenant 60 days notice that it required the tenant to remove the fixtures.  The parties agreed that there was no extrinsic evidence that was relevant to the dispute and, instead, argued for competing interpretations of the terms of the lease.  Accordingly, the Court considered solely the contract terms in reaching its decision.

The Court held that the contract unambiguously outlined the parties rights and duties with respect to fixtures, and that all fixtures installed during the lease were "deemed surrendered" to the landlord at the expiration of the lease, though the landlord retained the right to require the tenant to remove the fixtures so long as it did so at least 60 days before the lease termination. Because the landlord had demanded that the tenant remove the fixtures only 11 days before the end of the lease, the tenant had no obligation to remove the fixtures, the ownership of the fixtures transferred to the landlord and it could not recover the cost of their removal (and the damage caused by the removal) from the tenant. 

In so holding, the Court rejected the landlord's allegation that the broad language "any and all fixtures" meant only non-trade fixtures, particularly where elsewhere in the contract the lease treated certain types of fixtures differently. It relied on the fact that the parties used less expansive language in some sections of the contract, pointing out that the landlord "possessed the vocabulary" to restrict that provision to certain types of fixtures had it intended to do.

The Court also ruled that the parties must employ common sense and view the contract as a whole when construing isolated sections of the contract and rejected the landlord's interpretation of a term in the lease that was inconsistent with the "evident intentions" of the lease. The Court consequently dismissed the Landlord's claim against the Tenant.

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