AUI Const. Grp., LLC v. Vaessen, 2016 IL App (2d) 160009 (Nov. 9, 2016) involved a subcontractor who constructed a tower to support a wind energy system. The contractor was later found bankrupt and the subcontractor sued to foreclose a mechanic’s lien on the property where the tower was constructed.
According to the appellate court the central question was whether the work constituted improvement to real property, which is lienable, as opposed to improvement to a trade fixture, which is not. The factors to consider in determining whether equipment added to property constitutes a land improvement are: (1) the nature of its attachment to the realty, (2) its adaptation to and necessity for the purposes to which the premises are devoted, and (3) whether it was intended that the item in question should be considered part of the realty. Intent is the preeminent factor, the other considerations being primarily evidences of intent. Thus, that an item can be removed does not conclusively establish that it is a trade fixture where it is clear that there is an intent to permanently improve the property by its installation.
The court observed that parties may contract to evidence an intention that title to chattels which become annexed to realty does not pass and that they retain their character as trade fixtures. The developer in this case had entered into an easement agreement with the landowners which expressed the parties’ intent that the tower was a trade fixture that would remain the property of the developer and not become a land improvement.
The court found the first two factors favored the subcontractor. The nature of the attachment of the wind energy system to the premises was considerable and the equipment was specific and necessary for the production of wind energy to which at least a portion of the premises was devoted. It found the third factor strongly weighed in favor of finding that the parties intended that the tower was a trade fixture. As the intent of the parties is the most important factor, the easement agreement expressing that intent established that the tower was a trade fixture. The court rejected the argument that the tower provided a benefit to the landowners because all they received was rent but rent is not a benefit for purposes of the Mechanic’s Lien Act. It also concluded that even though the removal of the tower would be impractical and damage the property did not favor a finding that it was a permanent improvement. While it would be expensive to remove the tower from the property, it was not impossible to do so. As such, this consideration did not outweigh the fact, reflected in the easement agreement, that the tower was intended to be temporary.
Author
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Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.
