Lease Clearly Shows that Landlord Owns Tenant Improvements

What Happened: Erection of a reception desk and bar fixture containing sinks for mixing hair color were among the improvements made at the landlord’s expense before a hair salon tenant moved in and opened shop. The reception desk and color bar were also among the assets the tenant attempted to sell upon vacating the premises seven years later. But the landlord insisted that it owned the fixtures, and the asset sale eventually fell through. So the tenant removed the reception desk and color bar, and the landlord had to rebuild them for the next tenant. Adding insult to injury, the court ruled that the fixtures were “trade fixtures” that the tenant owned and ordered the landlord to pay $20,000 in damages for “conversion”—that is, unlawfully asserting possession over the tenant’s property.

Decision: The Michigan appeals court turned the tables, finding that the tenant committed conversion.

Reasoning: The lease clearly specified that the original improvements were the landlord’s property. The exact language: “Any additions to, or alterations of, the Premises, except trade fixtures, shall upon expiration or termination of the Lease Term become a part of the realty and belongs to the Landlord.” The reception desk and color bar weren’t “trade fixtures” because they were attached to the property, the court reasoned. Moreover, they were mapped in a lease attachment as being part of the property that the tenant had to return at the end of the lease. And because the landlord owned the fixtures, the tenant committed conversion by removing them and had to pay damages to the landlord.

• Cassidy Rae Studio, LLC v. Bocks: 2019 Mich. App. LEXIS 8373, 2019 WL 7206114