What happens when a tenant leaves goods behind? Pages

What happens when a tenant vacates the premises and leaves goods behind?

Often commercial tenants leave items behind after vacating premises. This is distinct from the reinstatement of premises, which is a separate issue.

Sometimes items left behind can include: • Items of fitout such as partitioning, shelving and counters. • Air conditioning units, alarms, camera and video monitors. • Left over stock such as clothing, bric a brac and point of sale material. • Light boxes, signs and antennae.

Sometimes if the tenant has left in a hurry or been evicted, there can be the contents of a fully fitted restaurant or motor vehicles and other valuable items of equipment. These items then become a problem as the premises may be unsuitable to relet whilst these items remain on site. The former tenant may not also be in a position to collect them for whatever reason or there is a significant cost in doing so. This is not an uncommon problem however there various ways to resolve the matter.

What do the respective commercial leases list in relation to this matter?

The 2016 R.E.I.V. lease clause 10.2 states: “If the tenant does not comply with clause 10.1(a) the landlord or the managing agent may dispose of the tenant’s fixtures and fittings and goods in the manner permitted by the Australian Consumer Law and Fair Trading Act 2012 for the disposal of uncollected goods.”

The Australian Consumer Law and Fair Trading Act 2012 deals not only with commercial leased premises but also with goods held in general such as those left for repair. It covers residential tenants, secondhand dealers and the like. Sections 58 - 62 deal with low value goods under $200 which can be disposed of after giving the tenant 28 days’ notice. Medium value goods up to $5,000 also require that 28 days’ notice be given to the tenant but the items need to be sold privately or by auction. High value goods over $5,000 also require that 28 days’ notice be given to the tenant and private sale or auction of the goods must occur but additional conditions apply.

In some instances, the fitout or items of equipment are listed by priority creditors in the form of a Purchase Money Security Interest (PMSI) on the national Purchase Property Securities Register (PPSR). These items cannot be disposed of until the creditor is contacted and arrangements made for collection. Not every item is subject to a PMSI. Drink fridges, coffee machines and the like can be left on site however the supplier’s details are often listed and they will make arrangements to collect their goods when notified. It is important to dispose of these goods promptly to avoid prolonged vacancy and issues with misrepresentation to prospective new tenants.

An example of how abandoned goods are treated are dealt with in the following case at VCAT, Chantelle Enterprises Aust. Pty Ltd v Sangster Greenwood (Building and Property) 2019 VCAT 961 2 July 2019.

The case had been the subject of a previous hearing BP 1066/2108 involving the determination of whether the premises (were) abandoned, whether

CONTINUED FROM PAGE 27 the re-entry (by the landlord) was lawful and whether the premises (were) unsafe. The most recent order then dealt with whether the applicant (tenant) was entitled to re-enter the premises and whether or not goods left on the premises were abandoned.

Background

The leased premises comprised a restaurant in the Dandenong Ranges. The tenant vacated the premises due to alleged defects with the building and the landlord subsequently issued a Section 146 notice the following month for arrears of rent. The Yarra Ranges Council then issued a Minor Buildings Works Order requiring the landlord to carry out restumping at the premises. The landlord then undertook the works to comply with the order and advised the tenant to recommence trading. The tenant did not do so and the landlord re-entered the premises thereafter on the basis of surrender and or abandonment of the lease by the tenant. Months later the tenant contacted the landlord and requested the return of goods, being those items relating to a fixtures and fittings in the restaurant. The landlord some 12 months following abandonment advised the tenant to remove its goods which the tenant failed to do so. The matter proceeded to VCAT this year wherein the re-entry by the landlord was determined to be lawful and that the goods abandoned by the tenant reverted to the landlord.

Points to consider with this determination

1. Abandonment of the lease occurred due to a failure by the tenant to seek relief of forfeiture and its actions were consistent with abandonment of the lease.

2. Unlike the various provisions of the Australian Consumer Law and Fair Trading Act 2012 mentioned is our column previously, the member accepted the provisions of the lease, in that items abandoned by the tenant would automatically revert to the landlord. The two actions at VCAT resulted in the loss of more than 12 months’ rent and outgoings as well as significant legal costs.

3. A section 146 notice issued for arrears of rent was not valid as a means of re-entering the premises and ending the lease at the expiry of 14 days from the date of issue because rent is not payable where the premises cannot be used or occupied. See sect 57 of the Act.

4. The premises ended up being sold approximately 12 months after abandonment by the tenant. The two actions at VCAT resulted in the loss of more than 12 months’ rent and outgoings as well as significant legal costs. The reader is left to consider what may have happened if repairs to the premises had been undertaken in a more agreeable manner with the tenant.