At the heart of every business relocation is the inventory and review of all on site property. Central to the relocation process is analysis of whether the material found on site is personal property, or whether it can be considered a “fixture.” It makes the relocation agent’s job more difficult that the demarcation between personal property and fixtures is not a bright line. Failure to gather the necessary information and make the proper determination can complicate a move and generate bad feelings with the displacee.

Take one example: Is a hydraulic lift personal property or real property? Is it a fixture or a trade fixture? Is there a difference and why does it matter? What about walk-in coolers, automotive equipment, built-in sales counters, kitchen equipment, or hotel furniture?[1]

I hate to say this, but the answer to the first question is “IT DEPENDS.”[2] In relocation, we often find the answers by asking more questions. Is this hydraulic lift permanently affixed to the real estate? Does the owner of the lift intend to move it, and is it even moveable? What does the appraiser think?[3] What does the displacee say? Will the agency agree? Do we need to call an attorney regarding applicable state law about fixtures?

Is the lift a fixture? Perhaps. If an item was originally personal property but has become part of the real estate, the item may be a fixture and may or may not be treated as real property. If the item is a fixture and deemed to be part of the realty, it should not be moved, but rather valued as part of the real property acquisition.

A trade fixture is different. A trade fixture is an item of personal property which has been attached and possibly even adapted to the real estate, but without the intention that the item will remain there permanently. A trade fixture is treated as personal property. The displacee may be entitled to reimbursement for the cost to move and reconnect it.

These distinctions are extremely important to the relocation process. Per the Uniform Relocation Assistance and Real Property Acquisition Act and the accompanying regulations (49 C.F.R. § 24.301), actual, reasonable, and necessary moving costs for any item of personal property (including trade fixtures) are eligible for reimbursement. Moving costs for any item which is determined to be real property (including fixtures) are not eligible for reimbursement. Problems can arise throughout the relocation process if this determination is not made early.

A relocation agent should make every effort to be present at the appraisal inspection. This will give the agent a peek into the fixture analysis and could save time and money down the line. If an item of personal property is being treated as a fixture in the acquisition, and thus the landowner is being compensated for the fixture in the acquisition, then part of our work may already be done.[4] It is an opportunity to exchange information with the displacee while also beginning to build rapport. It is also the appropriate time to observe the property and any items which may be moving. Most importantly, this is when any items of personal property should be identified. According to 49 CFR §24.205(c)(2)(C), advisory services include an identification and resolution of personalty/realty issues. Every effort must made to identify and resolve realty /personalty issues prior to, or at the time of, the appraisal of the property.

In addition to the obligations of the relocation agent to assist in this process, the appraiser is tasked with providing an appraisal report which must include [a]n adequate description of the physical characteristics of the property being appraised . . . , including items identified as personal property. (49 C.F.R. § 24.103(a)(2)(i)).

The relocation agent should work in conjunction with the displacee and the appraiser to identify any ambiguous items during the appraisal inspection. The owner of the items may have more information about these items than can be discerned by the appraiser or relocation agent. How is it affixed? How is it adapted to the space? Can it be moved? Is the owner intending to move it? The owner’s answers are not binding but may be extremely helpful. The appraiser must exercise judgment and can reject the owner’s answer if the fixture plainly does not meet the test. Care should be taken in cases of disagreement to make sure the appraiser can clearly identify the reasons for his or her determination.

Please note that state laws vary on this topic. As always, consult your local agency!

And look for a second part of this series where the legal analysis of these issues is presented.

[1] A colleague recently asked me why my essays contain so many questions. Because that’s what relocation agents do…ask questions.
[2] The same colleague also asked me why I can’t give a straight answer. Because, as everyone knows, relocation is not always simple!
[3] Beware of appraisers who want to be attorneys!
[4] Note if there is a disagreement between the displacee and the appraiser over whether something is a fixture, this could mean trouble down the road. Sometimes, the displacee may even “change his mind” after his lawyer gets involved!

Kristen Bennett, SR/WA, R/W-RAC is the President of Blackbird Right of Way LLC and the CEO of Pendulum Land Services, LLC.

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