Australia: Make good, 'fixtures' and the impact of the PPSA

Landlord and Tenant alert
Last Updated: 30 May 2013
Article by Rob Jarvin
Focus: Leasing and the PPSA
Services: Property & Projects
Industry Focus: Property

Make good obligations in leases often bring up questions of whether various items brought onto leased premises by tenants are fixtures or chattels. This article looks at the question of fixtures and whether the Personal Property Securities Act 2009 (Cth) (PPSA) has any impact on the issue.


The current trend for most commercial and retail leases is to specify a "back to base building" make good covenant which requires a tenant to remove all fitout and equipment, regardless of whether it has been installed by the tenant or the landlord. The premises are then essentially returned to an empty shell, ready for the next occupant to come in and install its own fitout.

Not being in the business of "de-construction" or "project management", some tenants elect to negotiate a make good payout with their landlord to absolve themselves of the make good obligations under the lease. The tenant will then simply remove its loose equipment and vacate the premises on the lease expiry date. However, the default position will usually be that the tenant is obliged to make good the premises prior to lease expiry.

A variation on the default position may arise where the landlord does not actually want the tenant to completely remove the fitout. For premises such as restaurants, food outlets, bars, medical centres, gyms and purpose-built industrial facilities, there may be specialised fitout which is substantial and suited to a particular use of the premises. The premises may not be lettable for any other type of business without substantial reconfiguration or capital works. In those instances, the landlord's preference may well be for the tenant to leave part, or all of the fitout in the premises.

In the case of a standard office fitout, the cost of removal may potentially exceed any value in re-using or on-selling the fitout. In these circumstances, landlords would tend towards requiring a full make good. However, in the case of a restaurant fitout for example, there is a secondary market for large equipment such as fridges, cool-rooms, ovens, fryers and the like. Here the tenant may prefer to carry out a full make good with the intention of removing and selling or re-using those valuable items. As such, there may be competing interests between the tenant who wants to remove the fitout and the landlord who would prefer that it remain on site on lease expiry.

Where a lease is not clear as to who owns certain items of fitout or the parties are in dispute about the interpretation of the make good covenant, the question may arise as to whether a particular part of the fitout constitutes a chattel or a fixture.

The law of fixtures

The law of fixtures has a long history, with the common law setting down criteria as far back as the 1872 English case of Holland v Hodgson which dealt with looms being fixed to the floor of a mill. Mercifully this article is not intended to be a dissertation on the case law in the area. Nor does it aim to provide a simple answer to the question of 'what is a fixture?' The answer to that question will necessarily depend on the specifics of each individual situation.

You might then be asking, why does classification as a fixture matter? The reason is that the case law has established a principle that anything which is properly categorised as a fixture is part of the land and therefore owned by the owner of the land, regardless of who may have originally owned the item and affixed it to the property. By installing an item of fitout in such a way that it becomes "part of the land", a tenant may change the status of the object from a chattel to a fixture and thereby (unintentionally) convert ownership of that item to the landlord.

To summarise (very briefly!) the extended case law and leaving aside the distinction between 'landlord's fixtures' and 'tenant's fixtures', on the question of whether something is a fixture, the Court generally considers:

  1. the intention of the parties in affixing the item to the land, and
  2. the degree of annexation.

Now you may be imagining some dated office partitions or rickety warehouse racking and questioning why they would ever give rise to any substantial dispute. Well, in some circumstances, significant amounts can be involved. For example, the modern day version of the loom issue in Holland v Hodgson arose recently in the case of In the matter of Cancer Care Institute of Australia Pty Limited (administrator appointed) [2013] NSWSC 37 (Cancer Care case). There the Court was asked to address the fixtures question in relation to two cancer treatment linear accelerators that had been installed in a medical centre premises. They had a value of almost $9,000,000. A significant loss would be suffered by the tenant (or equipment financier) if the equipment had been installed with the intention, and sufficient annexation, so as to become part of the land.

PPSA considerations

The PPSA has the potential to impact this particular area of leasing and, in an article last year (click here to view), we wrote about some points to consider. That legislation affects anything that is personal property and certainly has the potential to impact a tenant's fitout. However, the PPSA does not apply to an interest in a fixture. So, is the PPSA relevant to the fixtures issue or not?

There are two points to note:

  1. Discrepancy in definitions
  2. There may be a discrepancy between the definition of "fixture" at general law and the definition laid down in the PPSA. This may lead to complications in the application of the PPSA exemption relating to "an interest in a fixture". We will need to wait for some case law for guidance on the issue and whether the new legislative regime has any impact on a century and a half of case law. At this point, both landlords and tenants should consider the position carefully in relation to any fitout and, at the time new leases are being negotiated, turn their minds to the question of ownership of the fitout and what needs to be done to protect their relevant interest (both in the lease document itself, but also by lodging any registrations necessary under the PPSA).

  1. Security interest over equipment
  2. The Cancer Care case provides some guidance. In determining that the cancer treatment linear accelerators were not fixtures, the Court considered it relevant that the accelerators were financed and subject to a purchase money security interest. The Court said that the fact that the parties had proceeded on the basis that the tenant was able to give an effective security interest over the equipment was inconsistent with any objective intention of the tenant that the equipment would become part of the premises (as a fixture) and, as such, become the property of the landlord.

    The fact that the particular fitout was financed was relevant. It was not determinative of the items being categorised as tenant's property (i.e. not fixtures), but it was one of the factors considered by the Court as supporting that result. This may raise some concerns for landlords who are themselves financing fitout or approving certain fitout on the basis that it will remain in the premises after the tenant leaves.

Landlords should carefully consider whether there are any PPSA security interests relating to that equipment. This is important because, firstly, if the landlord is also acting in the capacity of financier, a failure to register may result in another prior registered security holder defeating the landlord's interest. Secondly, another party's registration of a security interest may be indicative that the equipment is not intended to be a fixture.

Although it did not necessarily break any new ground, the Cancer Care case is a thorough and useful examination of the general law of fixtures, even though it did not directly address the potential discrepancy between the case law and the definition of 'fixture' in the PPSA. It acts as another prompt to both landlords and tenants to turn their minds to the impact of the PPSA and assess whether their standard leasing practices need to be reviewed.

Key considerations

For landlords: If any part of a tenant's fitout is being financed or contributed to by you as a landlord, where that particular fitout constitutes chattels (or if there is any doubt as to whether the fitout will actually become a fixture), you should consider the impact of the PPSA and seek advice as to whether you need to lodge a financing statement to protect an interest in the relevant fitout. Remember, simply because you are acting as a landlord does not mean that you are not also acting as a financier under the terms of the PPSA. If that is the case, the Court will apply the rules of the PPSA in relation to priority claims and, potentially, in relation to the interpretation of what constitutes a fixture.

For tenants: If you as a tenant are attaching or affixing items of fitout to premises in any significant way, but do not intend those items to become fixtures, you should address this issue with the landlord at the lease negotiation stage or, at least, prior to installation. It is always a good idea to include a specific acknowledgement as to ownership, either in the lease documentation or by other agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions