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Is a chalet a chattel? The rules laid bare

In Spielplatz Ltd v Pearson and another [2015] the Court of Appeal had to decide whether a chalet was a chattel (movable possession) or had become part of the land on which it was situated.  The Court decided it was part of the land.

In 1992, the freehold owner of a naturist resort granted an annual tenancy of a plot of land to the Pearsons. The tenancy agreement described the premises as “the plot or clearing in the grounds”.  The previous tenants had built a chalet on the land and the Pearsons separately purchased the chalet from them.

During 2011 and 2012, the Pearsons carried out extensive renovations to the chalet but after some unfriendly correspondence between them and the freeholder, the Pearsons were served with a six-month notice to quit.

The case revolved around whether the chalet formed part of the plot of land. If so, the tenancy would include both soil and chalet and not just the land itself. This would make it a tenancy of a separate dwelling and protected under the Housing Act 1988as an assured tenancy.   A landlord of an assured tenancy can only recover possession by following the procedures set out in the Act and demonstrating one of the statutory grounds for possession. Spielplatz had done neither as it asserted that the Pearsons had an unprotected tenancy of the plot which it had ended by the notice to quit. The Pearsons won the first round. The freeholder appealed.

The Court of Appeal referred to the well-established House of Lords decision in Elitestone Ltd v Morris [1997] 1 W.L.R. 687, which held that whether a structure could be removed from the land without being demolished was of significant importance. If not, then the structure could not have been intended to remain a chattel and must have been intended to form part of the land.

Expert evidence adduced at trial had indicated that the chalet could not be removed without dismantling it into its constituent parts.  This evidence, together with the fact that the purpose of the chalet was to enable its occupiers to enjoy the amenities of the land, left the Court of Appeal in no doubt that the chalet was part of the land.  Further, the fact that the tenancy agreement did not refer to the chalet did not prevent the chalet from becoming part of the land.

The Court of Appeal reiterated that it was immaterial that both parties believed that the chalet belonged to the Pearsons to sell on to any purchasers of their lease.  This misplaced belief, the court said, “amounts to nothing more than evidence of their subjective beliefs and intentions upon which Elitestone shows no reliance can be placed”.

The result was that the Pearsons had the protection of statute and the freeholder’s possession claim failed.

The question of what has become part of the property and what is merely a chattel is frequently relevant to commercial property in the field of dilapidations claims.  In the residential sphere, any landlord finding itself in a similar situation to Spielplatz may wish to comply with the requirements of the Act before seeking to recover possession as otherwise it could find itself feeling rather exposed.