Getting rid of goods abandoned due to COVID-19 – what are a landlord’s options?

Introduction

As a consequence of COVID-19 impacting businesses and henceleases, much debate and uncertainty has surrounded the ongoing obligations of landlords and tenants alike of a commercial or retail premises. Whilst theVictorian State government has set out emergency COVID-19 related legislative provisions and has recently updated the rent relief scheme (Commercial Tenancy Retail Scheme) to alleviate financial hardship between the parties, some issues involving obligations of both the landlords and tenants alike lack clarity.

One such issue concerns what a landlord is required todo in the event a tenant fails to collect or take delivery of its goods fromthe leased premises (commercial or retail)?

Determing if the goods are abandoned

If the tenant has not collected or taken delivery or given directions as to the delivery of those goods, they can be considered as abandoned or uncollected goods. If the tenant cannot be located or communicated with, a landlord can consider the tenant’s uncollected goods to be abandoned. The goods must be differentiated from any fixtures or fittings affixed permanently to the premises.

Ideally, the lease should relevantly address and contain clauses for the tenant to ‘make good’ and remove goods when the lease is terminated, however un-affixed personal property owned and uncollected by the tenant often creates huge issues for the landlord and requires adequate steps be undertaken so as to avoid the risk of the landlord committing trespass.

If the lease is silent on the above, the parties can rely on the Australian Consumer Law and Fair Trading Act 2012 (Act) where the conduct of the landlord maybe determined within the confines of the Act.

Steps to undertake when goods are uncollected

Firstly, care should be taken to confirm that the goods are indeed abandoned and that the landlord has not denied or stopped delivery of those goods to the tenant. Failure to pay rent is not a reason to deny the tenant access to the goods. Communication is the key in determining whether the tenant has relinquished ownership of the uncollected goods. While difficult at times, and as best as the landlord can, it must be established that the tenant has no desire to re-claim abandoned goods.

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1. The landlord should serve a written notice to the tenant of the intention to dispose of the abandoned goods after 28 days if the tenant has not taken delivery or provided directions. The notice must be clear and contain accurate information of the parties and the goods. The notice should be prepared in the correct format and be properly served upon the tenant so as to avoid any issues as to service.

2. Once 28 days has lapsed, the goods may be disposed of in accordance with Division 2 of the Act based on the value of the uncollected goods. These are outlined in the table below:

3. Once the notice for disposal period has lapsed, the landlord may dispose of the uncollected goods by public auction or by private sale (for low value goods).

4. The landlord may also make an application to VCAT to seek orders for disposal of the goods.

Can the landlord retain proceeds from the sale of the abandoned goods?

A landlord is entitled to the payment of a relevant charge towards the disposal from the proceeds of the sale, but is unable to claim loss of rent from these proceeds. Any proceeds from the sale of the goods must be deposited as unclaimed money pursuant to the Unclaimed Money Act 2008 (Vic) with the State Revenue Office. A relevant charge claimed towards the disposal by the landlord may be challenged by making an application at VCAT.

How can Sharrock Pitman Legal assist?

In order for both landlord and tenants to safeguard their interests (especially during COVID-19), a carefully drafted lease is the key to mitigating risks and give clarity on what steps should be followed, especially if goods are abandoned or uncollected.

As Accredited Property Law Specialists, we provide sound, commercial and concise legal advice on all lease-related issues for both landlords and tenants alike. If specific advice is sought in relation to the matters contained in this article, or any other  property related matters, feel free to contact us on 1300 205 506 or by email at sp@sharrockpitman.com.au.

We look forward to being of service.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers. ‍