By Russell Cocks, Solicitor

 First published in the Law Institute Journal

Solicitors have to deal with abandoned goods left on premises in three common situations:

1. in a sale, where the vendor is obliged to give vacant possession;
2. in a lease, where the tenant is obliged to return the premises to the landlord in their original condition; and
3. in a mortgage, where the mortgagor defaults and vacates the premises.

In each of these situations the ‘abandoning’ party may intend to return for the goods, or may have no such intention. However, one thing is certain and that is that legal ownership of the goods remains with the ‘abandoning’ party and the purchaser, landlord or mortgagee does not acquire ownership of the goods simply by taking possession of them.

Recollection of the many ‘finder’ cases that have been used to torture property law students for decades will remind us that the law is yet to devise an easily accessible formula for determining when ownership of personal property passes from one possessor to another. Additionally, the amounts involved in the typical situations outlined above rarely justify submission of the dispute to a court for determination. Thus our advice must strike a balance between a legal analysis and a practical solution.

Sale

Typically a purchaser discovers ‘abandoned’ goods, belonging either to the vendor or a vacating tenant, as settlement approaches. It is unlikely that the presence of abandoned goods will justify a purchaser in delaying settlement, unless their presence amounts to such a serious interference with the enjoyment of the property as to amount to a failure to deliver vacant possession. A purchaser might sue a vendor after settlement for damages, but this is rarely a satisfactory option and the purchaser, having been forced to settle, simply wants to be able to dispose of the goods. But the law has always regarded a person who has possession of goods known to belong to another as having duties to that true owner and concepts like bailment and trespass to goods linger in the background. It may be that the vendor intends to return for the goods shortly after settlement and the purchaser should be advised to secure and store the goods in a convenient location (the garage?) and await a claim for their return by the true owner. If no such claim is forthcoming the passing of time does not improve the purchaser’s legal right to the goods, but a trip to the tip in six months is likely to be a safer option than one made immediately after settlement.

Lease

A landlord faced with abandoned goods after determination of a lease may take some solace in the decision of Haniotis v Dimitriou where it was decided that a landlord could remove the tenant’s goods and place them ‘outside’, ‘in the street’, ‘on the footpath’. Indeed s 42B and C of the Landlord and Tenant Act give a landlord the right to remove and store abandoned goods and, ultimately, the right to sell them to recover such costs, treating any residue as unclaimed money. However few landlords are going to find such a time-consuming and labour-intensive option attractive.

Special rules apply in relation to the ‘darlings of the law’ – retail and residential tenants. Kiwi Munchies P/L v Nikolitis concerned a tenant who sought access to the premises after determination of the lease to remove goods. The landlord refused access until arrears of rent were paid, but upon application by the tenant, VCAT ordered the landlord to pay $5,000 damages to the tenant. The goods belonged to the tenant and the landlord was not entitled to prevent the tenant from exercising rights of ownership, even if the landlord had other rights against the tenant.

Division 3 of Part 9 of the Residential Tenancies Act sets out a prescriptive regime that a landlord must follow in respect of ‘goods which are left behind’ by residential tenants. Great care must be taken when following that regime as media reports tend to indicate that tenants often have an inflated view of the value of goods that landlord’s have regarded as worthless.

Mortgage

A mortgage of real estate does not encumber the personal property of the mortgagor. If the mortgagee takes possession of the mortgaged property after default, the mortgagee has no right to dispose of, or sell, the mortgagor’s personal property. A mortgagee will therefore generally leave any such property on the premises and include a condition in any sale made pursuant to the mortgage that the sale does not include personal property on the premises. In this way the mortgagee simply handpasses the problem to the purchaser, who is in the same position as a purchaser from a vendor who leaves abandoned goods on the premises, as discussed above.

Conclusion

Abandoned goods are one of life’s miseries. Nobody wants them, least of all the solicitor, but the law provides few answers to those afflicted by them. Whilst the old adage of ‘time heals all pain’ may not apply perfectly, the best advice to a client is to avoid impetuous action and make alternative arrangements so as to postpone a final decision for 3-6 months. The legal environment will not change in that time, but the climate might be better.

Tip Box

Whilst written for Victoria this article has interest and relevance for practitioners in all states.