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How does a landlord legally dispose of goods left behind by a former tenant?

 

Evicting a tenant for non-payment of rent is sometimes to win only half the battle. The other half is to dispose of the goods they have left behind in the property, without attracting legal liability for wrongful disposal – the tort of conversion.

Different rules apply to Residential Leases from Commercial Leases.

Residential Leases

The landlord’s rights to dispose of goods or rubbish left behind after a tenant vacates are prescribed in the Residential Tenancies Act 2010 (NSW).

The procedure is that landlord must give a disposal notice, then wait 14 days before disposing of the goods, and account for the proceeds of sale:

s 130

  1. The landlord or landlord’s agent may dispose of goods (other than personal documents) in accordance with this section if the former tenant or other person entitled to possession of the goods fails to collect or make arrangements to collect the goods within 14 days of a disposal notice being given* …
     
  2. The landlord or landlord’s agent may dispose of any such goods by selling them or in any other lawful manner**.
  1. A landlord or landlord’s agent who sells goods under this section must, if requested to do so …. pay the sale proceeds to the former tenant or other person. The landlord or landlord’s agent may deduct from the proceeds an occupation fee*** … and the reasonable costs of the sale.

Notes:

* the goods may be removed from the premises and stored in a safe place pending disposal or collection by the tenant (s 129);

** “other lawful manner” includes donating them to charity or the local council collection;

*** “occupation fee” means a daily fee payable if the premises cannot be re-rented until the goods are removed or to pay for storage, but cannot exceed rent for 14 days (s 132).

Commercial Leases

The landlord’s rights to dispose of goods left behind by a tenant are governed by the lease. If there is no covenant in the lease, or if the landlord desires greater certainty, they can obtain a disposal order under the Uncollected Goods Act 1995 (NSW).

Illustrations:

In the recent decision of Roads and Maritime Services v Young [2020] NSWSC 529 (11 May 2020) Justice Fagan of the Supreme Court of New South Wales considered that this lease covenant contained appropriate authority to dispose of the lessee’s fixtures:

13.1 Removal of Lessees Fixtures by Lessee

(a) If notified by the Lessor in writing the Lessee must, at the Lessee’s cost, Remove the Lessee’s Fixtures from the Leased Land and Licensed Area upon the expiration or earlier determination of this Lease […]

13.3 Failure to Remove Improvements and Fixtures

If the Lessee does not comply with cl 13.1 […] of this Lease then:

(a) the Lessor may Remove or partially Remove and dispose of the […] Lessee’s Fixtures on the Leased Land and Licensed Area in such manner and on such terms as the Lessor determines, acting reasonably; and

(b) the Lessee must pay to the Lessor on demand the costs and expenses incurred by the Lessor in taking action under cl 13.3(a) of this Lease.

In this case, the lease was over the seabed in Pearl Bay, Middle Harbour in Sydney, over which the lessee moored her houseboat. The lessor, Roads and Maritime Services (RMS), terminated the lease and obtained a judgment for unpaid rent. RMS issued a Writ of Possession. The lessee vacated the houseboat and the Sheriff recovered possession.

RMS claimed $132,000 for the cost of deconstruction, demolition and disposal of the houseboat and removal of the pontoon, plus $9,154.20 for disconnection of services and $2,585 for a survey.

Justice Fagan said:

  • “I am satisfied that all of the above amounts are payable by the defendant pursuant to cl 13 of the lease … Clause 13.3(a) of the lease authorised the plaintiff to dispose of fixtures removed from the leased area, including the pontoon and dwelling. It was therefore not strictly necessary for the plaintiff to invoke the Uncollected Goods Act or to establish, for the purposes of that Act, that the value of the removed items was less than $100… judgment will be entered for the plaintiff [for] $143,739.20 and the defendant will be ordered to pay the plaintiff’s costs of the application to recover the removal expenses.”

In an earlier decision of Bellos v AMP [1999] NSWCA 385 (20 October 1999) the New South Wales Court of Appeal (Handley JA, Powell JA and Beazley JA agreeing) considered whether disposal orders made under the Uncollected Goods Act 1995 (the Act) were valid.

The orders made by the primary judge were summarized by the Court of Appeal:

  • The Judge found that the goods were uncollected goods within the meaning of s 5(a) of the Act and made a declaration that the [AMP] Society was entitled to dispose of them pursuant to cl 17.10 of the lease. He also made a declaration that the [AMP] Society was entitled to be reimbursed for its expenses in removing the goods from the premises and storing them until the date of disposal, and made an order under s 9(1)(a) of the Act authorising the Society to dispose of the goods by public auction after one calendar month from the date of the order.”

Clause 17.10 of the lease provided:

17.10 The Landlord may treat the Tenant’s Property as abandoned and deal with it in any way
         it sees fit at the Tenant’s expense if the Tenant does not:
         (a) give its notice on time; or
         (b) remove the Tenant’s Property in accordance with this Clause 17 or a notice given under it.

In this case, the lease was of a shop in Goldfields House, at Circular Quay, which the Tenant had fitted out as a model ship museum in which a large number of model ship and other exhibits were displayed.

The Tenant defaulted in payment of rent and the lease was terminated. The AMP Society gave notice to remove the goods, stating that if not removed, it would treat the goods as abandoned. The Tenant did not remove the goods as required, and so the AMP removed the goods and placed them in storage, pending disposal.

The Court of Appeal upheld the disposal orders made by the primary judge.

Conclusion: when in doubt, use the Uncollected Goods Act 1995 (NSW)

Obtaining an order for disposal of tenant’s goods is a relatively simple and inexpensive procedure under the Uncollected Goods Act 1995 (NSW). It has the advantage that the court order is made with the authority of the Court, it is not simply the enforcement of a covenant in a lease. A court order will confer good legal title on a purchaser if the goods are sold by private sale (s 34).

To illustrate, we recently obtained orders for the disposal of goods in a warehouse, which remained after the lessor terminated the lease and re-entered into possession.

The goods were 2,800 steel drums full of Activated Carbon (see photos). They had some value, and so the lessor was in the same as the AMP in relation to the model ships that a court order would give it protection against claims. In this case, the former lessee asserted a value of $30 per drum, whereas the best offer received by the lessor was $8.40 per drum ex warehouse by private sale.

The lessee was bankrupted by the ATO. This caused further delays until the Trustee in Bankruptcy served a Disclaimer of Onerous Property under s 133 of the Bankruptcy Act 1966 on the grounds the goods were unsaleable. Soon afterwards, the lessee was discharged from bankruptcy.

These were the orders made by the Local Court (amounts redacted):

  • The Notice of Motion lodged by the Plaintiffs is granted and I make the following orders:
     
    1. Pursuant to Part 2 of the Uncollected Goods Act 1995 (the Act) the Applicant is entitled to dispose of the following uncollected goods by way of a private sale.
      (a) 2,800 x 200 litre sealed drums containing Activated Carbon;
      (b) Hardwood Timber of 2 metres or less.
      (the Uncollected Goods)
       
    2. Pursuant to Section 10 of the Act, the Applicant is entitled to apply the proceeds of sale of the Uncollected Goods in the following order:
      (a) to the judgment debt of $... for unpaid rent to …; next
      (b) to the interest accrued … in the sum of $...;
      (c) to the costs of storage of the Uncollected Goods … since … in the sum of $...;
      (d) to the costs of this application in the sum of $...; and
      (e) any balance remaining to the Chief Commissioner of State Revenue.
       

Notes: The order for sale gives legal authority to sell, and the inclusion of ‘by private
           sale’ gives good legal title to a purchaser which would otherwise be only
           available if the sale were by auction.

The directions for the application of the proceeds of sale removes disputes. Note that any amount left over goes to the Chief Commissioner of State Revenue, not the tenant. This is in accordance with the Uncollected Goods Act.



Some of the 2,800 200litre / 44 gallon drums of activated carbon stacked 4 rows high

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