Commercial property is typically leased to generate an income. Operating a lease with an errant tenant can be frustrating, costly and time consuming.
One common issue when regaining possession of a commercial property as a landlord is the disposal of tenants left-behind property which can often a lengthy and drawn-out process. For the majority of leases, landlords are required to give a requisite amount of written notice for any breaches of a lease which might entitle a landlord to terminate the lease and re-enter the premises. But landlords may be unaware that their obligations to the tenant do not always end once they re-enter the premises.
In situations where landlords forcibly re-enter the premises and regain possession of a commercial property, it is normally the case that tenants will still have some or all of their personal property remaining at the premises. In some circumstances, the tenant will be co-operative with the landlord and will amicably arrange for the collection of their personal property. But should the tenant refuse to collect their personal property, the landlord can often be at a loss as to how they can dispose their former tenant’s property so they can recommence leasing the premises to a new tenant.
In Victoria, Part 4.2 of the Australian Consumer Law and Fair Trading Act (The Act)governs how most commercial landlords can validly dispose of property left at a commercial property by a former tenant.[1]
In particular, the Act requires that commercial landlords provide a minimum of 28 days written notice to the commercial tenant that they intend to dispose of the tenant’s goods following the 28 day notice period.[2] If they cannot locate the commercial tenant and the goods are of low value (below $200 for goods which are not motor vehicles), they must also wait 60 days since the goods have been made available to the tenant for recollection before they dispose the goods.[3]
In addition:
- For Medium Value goods (between $200 and $5000 for goods which are not motor vehicles), where the commercial landlord is aware that the owner of the goods is not the tenant, the commercial landlord must contact that owner and provide them with the notice. Furthermore, if neither the commercial tenant or owner of the goods can be located, landlords must wait 90 days since the goods have been made available to the tenant for recollection before they dispose the goods.[4]
- For High Value goods (goods which are not motor vehicles and worth more than $5000), the commercial landlord must (in addition to the requirements for Medium Value Goods) conduct searches on the Personal Properties Security Register for any publicly registered interest in the goods. Furthermore, if neither the commercial tenant or owner of the goods can be located, landlords must wait 180 days since the goods have been made available to the tenant for recollection before they dispose the goods.[5]
In the event that commercial tenants or owners of the goods arrange to recollect such goods, the commercial landlord is able to require that a reasonable charge (which is calculated in accordance with the Act) be paid to account for the storage costs of the goods until collection.[6]
However, s56(4) of the Australian Consumer Law and Fair Trading Act (Vic) states that requirements for giving notice under such Act only apply to leases where there is not already an agreement between the tenant and landlord regarding uncollected goods.[7]
As such, tenants and landlords can provide terms in the lease that avoid the remit of the Act, and in some cases, allow the uncollected goods to immediately become property of the landlord by virtue of abandonment.
While we would still advise that sufficient checks on the possible owners of property (including PPSR searches) be conducted in such circumstances, it is clear that the laborious process of removal of tenant’s goods under the Act can be avoided if landlords arrange for agreement regarding uncollected goods at the signing of the lease.
At Kennedy Guy Lawyers, we have extensive experience in advising landlords in regards to leasing issues and problematic tenants and we can assist in the drafting of leases which can reduce the expenses which landlords may incur following the end of a lease.
Kennedy Guy
For over fifty years, Kennedy Guy have provided advice and represented a variety of clients including individuals, families, and small medium and large enterprises. If you wish to engage the firm, feel free to contact us via our website, by emailing [email protected], or via phone at (03) 9311 8511.
This article was written by Jason Hong, Commercial Lawyer.
[1] Australian Consumer Law and Fair Trading Act 2012 (Vic) Part 4.2
[2] Ibid s60-s62.
[3] Ibid s60.
[4] Ibid s61.
[5] Ibid s62.
[6] Ibid s59.
[7] Ibid s56(4).
