Component Parts: What's Included with the House or Building?
LOUISIANA REALTORS • November 13, 2018
By: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Patricia B. McMurray
Buyers are often impressed by a property's features such as solar panels or a large porch. The house or building may also have beautiful light fixtures, commercial appliances or an outdoor kitchen with a grill. Which items the Seller is intending to sell and which items the Buyer is intending to purchase with the property is often a source of dispute and has led to litigation post-closing between Buyers and Sellers. Component parts of a house or building are transferred with the property. But what are the component parts of a house or building?
LOUISIANA LAW
Louisiana law provides a thing may become a component part of a building or house in three ways. First, by being incorporated into the building [1] (ex: the wood used for the door frames), by permanent attachment or items considered component parts by prevailing usage [2] (ex: drywall or shutters), or by written declaration of the owners. [3] Of these three types of component parts, items considered component parts of a house or building pursuant to "prevailing usage" are the most disputed because "prevailing usage" or what is typically considered a component part of a house or building may vary by region.
Component parts are defined in Article 466 of the Civil Code which provides:
Things that are attached to a building and that, according to prevailing usages, serve to complete a building of the same general type, without regard to its specific use, are its component parts. Component parts of this kind may include doors, shutters, gutters, and cabinetry, as well as plumbing, heating, cooling, electrical, and similar systems.
Things that are attached to a construction other than a building and that serve its principal use are its component parts.
Other things that are component parts of a building or other construction if they are attached to such a degree that cannot be removed without substantial damage to themselves or to the building or other construction. (emphasis supplied)
Article 466 provides guidance but does not specifically address all items which may or may not be included as component parts. If an item can be removed without substantial damage to the building it may still be a component part if society considers an item to be an integral part of a building or house.
In applying Articles 466, the Court will consider:
(a) whether the items could be removed without substantial damage to the house/building and
(b) if the item can be removed without substantial damage to the building, does prevailing usage generally consider these items to be an integral part of the house/building.
WHAT ARE SOME EXAMPLES OF TYPICAL COMPONENT PARTS OF A HOUSE?
Antique chandeliers physically connected to internal house wiring have been held to be "electrical installations" and thus component parts of a house [4]. This classification holds true even though the chandeliers could be removed without substantial damage to the chandeliers or to the house [5]. Examples of other installations "permanently attached" to a house as component parts include items such as built-in stoves or ovens, wall and ceiling electric heaters, central heating and air-conditioning, heat pumps, electrical hot water heaters, built-in public address and alarm systems, overhead fans, interior physically attached light fixtures, exterior lighting, automatic garage door controls, and like electrical equipment [6]. Septic tanks, field lines and air-conditioning cooling pipes have all been found to be component parts of a structure. [7]
Whether window coverings are considered component parts of a structure are often an issue. There are no Louisiana cases addressing the definition of "window coverings". The most recent reported court decision on any type of window covering as a component part of a house was in 1946 when Venetian blinds were in dispute. The Court found the Venetian blinds held in place by brackets attached to the window frames by screws were not component parts .[8] In the Kelieher case though, the agreement between the parties did not reference the transfer of "window covering" as does the Louisiana Agreement to Buy and Sell mandatory form so it is unclear if the result would be the same if this issue was again presented to the court. Window coverings might include blinds, drapes, shades, interior shutters or valances, according to prevailing usage in the region. Window coverings attached to the house and serving to complete the building or house may be considered component parts and transferred with the sale unless specifically excluded.
Doorbells and security systems have also been the source of dispute as to whether they are considered component parts of a house or building. Some "door bells" with security system features like video or audio recordings may be considered "security systems" by some people. There are no Louisiana cases on point on this issue. In In re: Joseph [9] the US Bankruptcy Court found one important consideration in finding the doorbell a component part of the home to be whether the home would otherwise have a doorbell without the exterior garden bell at issue in the case.
HOW ARE COMPONENT PARTS ADDRESSED IN THE LOUISIANA AGREEMENT TO BUY OR SELL (THE "AGREEMENT")?
Lines 10 through 18 of the standard Louisiana Residential Agreement to Buy or Sell (the “Agreement”) list many items which are typically included as component parts of a house. These items include:
all fences, security systems, all installed speakers or installed sound systems, all landscaping, all outside TV antennas, all satellite dishes, all installed and/or built-in appliances, all ceiling fans, all air conditioning or heating systems including window units, all bathroom mirrors, all window coverings, blinds and associated hardware, all shutters, all flooring, all carpeting, all cabinet tops, all cabinet knobs or handles, all doors, all door knobs or handles, all windows, all roofing, all electrical systems, and all installed lighting fixtures, chandeliers and associated hardware, other constructions permanently attached to the ground.
Unless these items are deleted in the Agreement from the items to be sold as a component part, they will be sold with the house. If the Buyer wants to make sure specific item is included as a component part of the house, the item should be listed in the blanks provided in lines 20 through 22 of the Agreement. If a Seller wants to make sure certain items are excluded from the sale, the items should be specifically listed in the blanks provided in lines 19 through 22 of the Agreement. For commercial transactions, a REALTOR® should consider specifically listing any valuable, potential movable items which may be questionable as component parts of the structure in the purchase agreement.
HOW CAN A REALTOR® ASSIST BUYERS AND SELLERS IN AVOIDING DISPUTES OVER DETERMINING WHAT CONSTITUTES COMPONENT PARTS OF A HOUSE OR BUILDING?
Disputes between a Buyer and Seller in a real estate transaction as to whether a particular item has been transferred by the sale of real estate are not uncommon. The Agreement explicitly includes in the property description, “all buildings, structures, component parts, and all installed, built-in, permanently attached improvements, …” Residential Agreement to Buy or Sell, Lines 10 – 11 (emphasis added). Lines 10 through 18 of the Agreement further describe the component parts of the property being sold. This listing of specific items provides an opportunity to discuss with buyers and sellers exactly what items will remain with the property being sold, and what items will be removed by the Seller from the property. Specifically setting forth in the Agreement any items located on the property that are important to the buyer, which will be transferred in the sale may eliminate later controversy and possible litigation. [10]
[1] LA C.C. Art. 465
[2] LA C.C. Art. 466
[3] LA C.C. Art. 467
[4] Equibank v. U.S. I.R.S., 749 F.2d 1176 (5th Cir. 1985). This case was heard before the amendment to LA C.C. Art. 466 but is still considered good law. See comments to LA. C.C. Art. 466.
[5] Id. at 1180.
[6] Id. at 1179.
[7] Lakeside National Bank of Lake Charles vs. Moreaux, 576 So 2d 1096 (LA Ct. App 3rd Cir 1991)
[8] See Kelieher v. Gravois, 26 So 2d 304 (1946).
[9] 450 B.R. 677 (Bankr. E.D. Mich 2011)
[10] See 1 La. Prac. Real Est. § 1:13 (2d ed).
NAR’s latest consumer guide, “10 Tips for Unpacking Smartly After a Move,” was developed to help ease the burden buyers may feel when surrounded by boxes. For your clients on the cusp of a move, the guide suggests establishing a priority unpacking order, wiping down each room before unpacking, discarding boxes quickly, having garbage and donation bags at the ready, and more. Share the new guide along with the companion guide “10 Tips for Packing Smartly for a Move.” As a reminder, all guides in this series are available for download—in both English and Spanish—on facts.realtor . Please allow up to two weeks for the Spanish version of the latest resource to be translated and uploaded. For ease of reference, below is a list of the most recent guides: NEW: 10 Tips For Unpacking Smartly After A Move UPDATED : Multiple Listing Services Overcoming Roadblocks to a Sale or Purchase How Solar Impacts a Real Estate Transaction Navigating Interest Rate Shifts Thank you for your continued engagement with the “Consumer Guide” series and for sharing the resources with prospective clients to ensure they have the information they need to find success in their home buying or selling journey. Remember that these guides are for informational purposes only and are not meant to enact or change any existing NAR policy. Check out the next consumer guide on identifying homebuying wants vs. needs.
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From the Louisiana Department of Insurance: During a press conference today with Governor Jeff Landry, Insurance Commissioner Tim Temple announced that registration for the next round of the Louisiana Fortify Homes Program (LFHP) will open at 8 a.m. on Monday, June 1, and will include 3,000 grants. The registration period for this lottery will be open for three weeks, closing at 5 p.m. on Friday, June 19. During the press conference, Gov. Landry signed HB 1187 by Rep. Paul Sawyer, which will allow Louisiana Citizens Property Insurance Corporation to transfer $50 million in additional Katrina bond assessment funds to the LFHP. Combined with the $30 million in funding the program will receive through taxes and fees on insurance entities, the LFHP will receive a total of $80 million this year. “By lowering overall losses, we can reduce insurance and reinsurance costs, draw more insurers into the market, motivate existing companies to write additional policies and lower insurance premiums,” said Commissioner Temple. “That is exactly what the Louisiana Fortify Homes Program is designed to do.” The list of coastal parishes that are eligible to participate is expanding to include Acadia, Jefferson Davis and Lafayette parishes. Additionally, homeowners who live in the portions of Ascension, Calcasieu, Iberia, Livingston, St. Martin, St. Tammany, Tangipahoa and Vermilion parishes that were previously not included in the program will now be eligible to participate. A map showing the full list of eligible parishes is available on FortifyHomes.La.Gov . “Louisiana is the fastest growing state in the country for Fortified roofs, and that growth is not by accident—it is the result of strong support from Governor Landry and legislators like Chairman Talbot, Chairman Firment and Representative Sawyer, targeted program design, and a clear recognition that strengthening homes is one of the most effective ways to reduce insurance losses,” said Commissioner Temple. “At the end of the day, this program is about more than just roofs. It is about protecting families, it is about strengthening communities, and it is about putting Louisiana in a stronger position—both physically and economically—to face the challenges ahead.” To participate in the lottery, homeowners must register during the June registration period. Homeowners who registered for a previous round but were not selected must register again to participate. People who register on the last day of the registration period have the same chance of being selected as those who register on the first day, so there is no need to rush to register as soon as the period opens. When registering, homeowners will need to upload their homestead exemption, insurance policy declarations page that includes wind coverage, and flood insurance declarations page if the residence is in a flood zone. Homeowners who need assistance obtaining a copy of their homestead exemption should contact their parish tax assessor. Homeowners can contact their homeowners and flood insurance companies or agents for a copy of their policy declarations page. Homeowners are required to create a profile in the LFHP system before registering for the lottery and may do so by visiting the LFHP website and clicking the Login button. Homeowners who previously created a profile may use the same one for this and future rounds. Once the lottery registration period closes, the LFHP will randomly select 3,000 participants and send email notifications to registrants about whether they were selected to participate. These selection notices will be sent via email beginning on Monday, June 22. There are several program requirements that homeowners should be aware of before registering. Those interested in the program are encouraged to review eligibility information and frequently asked questions at FortifyHomes.La.Gov to determine whether their home meets the requirements for the program. If selected to participate in the grant program, homeowners will be financially responsible for having the home evaluated by a FORTIFIED-certified Evaluator as well as costs for the roof upgrade including permits, inspections and construction costs beyond the amount of the grant The LFHP provides grants of up to $10,000 for homeowners to upgrade their roofs to standards set by the Insurance Institute for Business & Home Safety. The program helps Louisiana homeowners strengthen their roofs to better withstand hurricane-force winds.
