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A landlord may forfeit a commercial lease when the tenant is in arrears with the rent (usually by 21 days or more) under Common Law.
The lease will be forfeited by the peaceable re-entry of the premises, normally undertaken by certificated enforcement agents.
This article will consider what rights and duties the landlord has with regards to goods left in the premises at the time of forfeiture.
When the lease has been forfeited by peaceable re-entry, the tenant’s fixtures revert to the landlord and the tenant has no right to remove them.
This was established in the case of Re Palmiero (1999).
However, it is a different matter when it comes to goods left behind in the premises. The tenant remains the legal owner, so the landlord could be sued by the tenant if he sells or disposes of them.
It is unlikely that this would apply to perishable or disposable goods, although the landlord would be wise to ensure that there is a clause in the lease that permits him to do this.
The landlord has become an “involuntary bailee”. He can sell or dispose of them if they have been abandoned, which means not only that they have been physically abandoned, but also that the owner intended to abandon them. Given that the lease was forfeited, this is unlikely.
Torts (Interference with Goods) Act 1977
Under this Act, the landlord must serve notices on the tenant in order to deal with these goods. The first is notice that the goods need to be collected within a reasonable time period, and the second is notice that the landlord intends to sell the goods if they are not collected within that time period.
In the case of commercial property, if the tenant’s address is not known, the landlord can place these notices prominently on the premises.
If the tenant sues
To avoid being sued by the tenant for the disposal of the goods, it is advisable to include clauses within the lease of what the landlord may do under these circumstances.
It is also best practice right after forfeiture to capture an inventory and photographic record of all the goods in situ, ideally taken by a third party.
If the tenant does sue, they can only do so for the value of the goods, not for their replacement value (another good reason for a photographic record).
Given that there are rent arrears, the landlord may also seek to recover those under CRAR (commercial rent arrears recovery) before deciding to forfeit the lease, in which case any goods of value may be removed for sale.
To recover rent arrears under CRAR, the landlord will need to provide seven clear days’ notice of enforcement and complete the entire rent recovery process whilst the lease is still in place, before going on to forfeit the lease, if that is still appropriate.
This may negate any tort considerations if all the goods left behind are of saleable value (and their combined value does not exceed that of the arrears).
Please get in touch if you would like to know more.
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