A recent High Court decision in Potton Developments v Thompson and Ennever dramatically highlights the importance of identifying whether the "building" on the land your client is buying is a chattel. It also serves to warn buyers that the most conventional-looking building might be a chattel, the sale of which would require express provision to be made.
A pub landlord had entered into an agreement with Potton whereby the publican rented nine pre-fabricated units, to be used as motel rooms and to remain Potton's personal property, for a seven-year term and in return for monthly rental payments.
The units had been built, finished and furnished in Potton's factory before being craned onto a pre-prepared concrete slab outside the pub.
They were designed to be removable at the end of the hire term or if the publican defaulted, but they looked like normal, conventionally built, permanent buildings.
The defendant bought the land from the publican's mortgagee in possession. Whereas the mortgagee had taken without notice of Potton's claim, the defendant knew of the claim but hoped to defeat it by arguing that the units were part of, or affixed to, the land and that they had thus acquired title under s62 of the Law of Property Act 1925.
This argument failed. Despite the outward appearance of the units, the court held that the degree of annexation was minimal and that it was entitled to look at, inter alia, the terms of the hire contract to ascertain the objective purpose of annexation. Holding the units to be chattels, the court ordered their delivery-up and substantial damages.
This is a warning to buyers that they cannot rely on apparently conventional structures automatically passing with the land (or even that they are the seller's to sell). Nor can they rely on HM Land Registry, since ownership of a chattel is not a registrable interest.
Where there is the slightest doubt, detailed enquiries as to the nature and history of the structure should be made. Failing this, a buyer could become the proud owner of a motel without rooms.
