March 1st - 2011

LEGAL BEAT: Fixture or chattel? Arguments focus on status of motel sign

A large commercial sign situated on a piece of property in western Ontario is at the centre of this dispute.

A large commercial sign situated on a piece of property in western Ontario is at the centre of this dispute.

The sign measured about 50 feet high and advertised a Travelodge motel behind a restaurant that visually blocked the motel from the main roadway. The sign in front of the restaurant promoted the existence of the motel in back.

At issue in this application was the ownership and status of the sign on an access easement over the restaurant property. The sign was attached by bolts to a cement base buried about 16 feet into the ground. Including a base, pole and frame, the sign was located close to Exeter Road on the restaurant property.

The motel and restaurant were previously located on a single property owned by Murray MacKay, who had them severed into two properties. MacKay erected the sign a few years before he sold the restaurant property to London (South) Purchaseco Inc. in 1998. When the city severed the property, it established a maintenance and access agreement in which the restaurant property was subject to an easement and right-of-way for the motel property. MacKay was required to keep the restaurant property free and clear of obstructions and to allow the motel property use of the easement for “ingress and egress.” Both parties shared equal payments to keep the easement clear.

In 2006, MacKay sold the restaurant property to Demers Holdings. A few days before closing, a Demers representative asked MacKay whether any easements or agreements existed to specifically permit the Travelodge sign to be located on the restaurant property. MacKay said there were not. A few days after closing, Demers asked London (South) to either show legal proof of permission allowing the motel sign on the restaurant property or else remove the sign.

Although the 1998 sale agreement referred to “all fixtures”, the sign was not mentioned as an excluded fixture in the 1998 sale documents. At the time of severance, no-one got around to properly dealing with the motel sign in legal documentation.

Demers, the applicant in this case, argued that the sign was a fixture that it now owned. The respondent, London (South), maintained that the sign was a chattel that it owned. London (South) sought a declaration stating that it had an irrevocable licence permitting a motel sign on the restaurant’s property.

The judge examined the applications to the municipality, the transactions of the previous owners and the parties’ intentions over the years. In the end the judge ruled that the sign was a chattel. However, he took into consideration the views of MacKay’s lawyer that London (South) had become the sign owner in 1998. The judge stated that London (South) had “demonstrated that the Travelodge sign was intended to be a chattel and to be controlled by it for purposes of advancing and promoting its hotel business.” The judge dismissed the Demers application.

Demers v London South 2008 CanLII 63204

MERV’S COMMENTS
“What’s that?” is my granddaughter’s favourite question. It can be applied to the source of this dispute. In this case as in many others, something that may look like a fixture could actually be a chattel, depending on the usual principles used in courts.

It is troubling that the previous lawyers and clients never documented this "thing" fully. Doing so could have avoided this unnecessary litigation.

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Ontario Real Estate Association

Jean-Adrien Delicano

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Ontario Real Estate Association
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