Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454
Whether items affixed but subject to a lease and contract clause stating otherwise were fixtures
Facts
The appellant company provided equipment, such as central heating and crematoria equipment, for local authorities to use in their properties. The equipment was held under a lease by the local authority on the basis that it would be returned to the appellant at the end of the lease and that the lease could be terminated and the equipment repossessed for non-payment. The lease contained a term stating that the equipment remained the property of the appellant even if affixed to the local authorities’ land. The appeals and cross appeals in these circumstances related to whether the items were fixtures and therefore not the property of the appellant for tax purposes.
Issues
The issues on appeal related to whether the equipment leased by the local authorities remained the property of the appellant even though it was affixed to the local authorities’ land.
Decision/Outcome
It was held that whilst under the relevant legislation with regards to tax considerations property belonged to a person who was the absolute owner of it, at law, when the equipment was affixed to the land of the local authorities, it became a fixture and therefore part of that land. The term in the lease dealing with repossession was not sufficient to prevent this occurrence. This meant that the equipment was not the property of the appellant on the basis that it was a fixture. The lease simply granted the appellant equitable rights over the property.
Updated 20 March 2026
This case summary accurately reflects the decision in Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454. The House of Lords’ ruling that contractual terms between lessor and lessee cannot prevent affixed equipment from becoming a fixture at law, and therefore part of the land, remains good law. The principle that such contractual arrangements create only equitable rights as between the parties, and cannot bind third parties or alter the position at common law, has been consistently applied in subsequent case law on fixtures and chattels. There have been no statutory changes or later Supreme Court or House of Lords decisions that materially alter the legal principles described. The article is accurate for the purposes for which it is written, though readers should note that the surrounding tax legislation has been substantially updated since 1996 and any tax-specific implications should be checked against current capital allowances legislation.
