Abandoned goods – What rights do landlords have?

You grant a lease or a licence, and the tenant or licensee (in this note, we will refer to both as “tenant”) moves out leaving fixtures or other items in the premises.  (Fixtures are items which are fixed to buildings or land in a way which indicates that they are not meant to ever be removed and reused somewhere else, and non-fixtures are items such as furniture, computers and other moveable items – referred to in this note as “chattels”.)

A landlord’s rights in relation to abandoned items will depend very much on the terms of the written lease or licence document.  While most leases say something about this issue, some leases, and many licence documents, do not deal with the issue, which can lead to significant problems for both parties.

Where the lease or licence does not deal with the issue

If the lease or licence does not properly deal with the issue of abandoned goods, then the legal position depends upon whether the goods are fixtures or chattels.

Fixtures

The legal position in relation to fixtures has significant consequences for the parties.  If there is a fixture which previously belonged to the tenant, that fixture will become the property of the landlord on the expiry or earlier termination of the lease or licence.  This means that the landlord is free to deal with the fixture as it thinks fit.  It also means that the landlord cannot require the tenant to remove the fixture.  If the fixture is valuable, this position could significantly favour the landlord.  If the fixture has no significant value, and the landlord needs to remove it and dispose of it, the position could significantly disadvantage the landlord.

Chattels

A landlord might assume that it is entitled to remove and dispose of abandoned chattels on the expiry or earlier termination of a lease or licence.  However, the position in New South Wales is governed by the Uncollected Goods Act, 1995.  This Act sets out a procedure that the landlord must follow if it wishes to dispose of uncollected goods.  The procedure is onerous and may require the landlord to apply to the Local Court for orders authorising it to dispose of uncollected goods, and even where a court order is not required, may require the landlord to give a tenant a lengthy period of time to collect their goods.  This can be a significant problem for a landlord.

Where the lease or licence deals with uncollected goods

Thankfully, there is a solution to the problems outlined above.  The common law, and the Uncollected Goods Act, both apply subject to any agreement between the parties.  This means that if the lease or licence document sets out the procedure to be followed by the parties in relation to uncollected goods, the parties may safely follow that procedure.

In practice, it is common for lease documents to say something about the issue. Licence documents, which tend to be less comprehensive, often fail to address the issue.

Lessons

Whether you are a landlord or a tenant, you should ensure that the relevant lease or licence sets out a procedure in relation to uncollected goods.  The procedure should address the following matters:

• The tenant should be allowed a fixed period of time after expiry or termination of lease or licence to remove its property, and if the tenant does not remove its property in that period the landlord should have the right to remove it, store it and dispose of it as it thinks fit.
• The tenant should pay the landlord’s costs of removing, storing and disposing of items.
• The landlord should be entitled to apply the proceeds to sale of such items towards payment of such costs and towards any other monies owing by the tenant to the landlord.

Author: Jack Gordon

Contributing Author: Melissa Potter