In a challenging economic climate, we usually see an increase in leases ending prematurely, either by agreement or by landlords irritating (forfeiting) the lease when they are faced with an insolvent tenant or bad payers. Tenants in these circumstances will often leave behind goods and equipment. The temptation for landlords is just to throw the stuff away so they can re-let but there are restrictions on what a landlord can and can't do with abandoned goods in Scotland.

What should you do if a tenant leaves goods behind at the premises (tenant not insolvent)?

  1. Try to contact the tenant to arrange for them to attend the premises, under supervision, so that they can clear out the unit at their expense.
  2. Check the lease – there might be a provision which says the landlord can dispose of the goods, sell them (and account to the tenant for any sale proceeds less storage costs) or simply dispose of them on the tenant's behalf.
  3. If the tenant refuses to clear the goods, or the lease perhaps requires you to hold them in storage or sell them, then you can ask the tenant to confirm in writing that they waive any rights they may have under the lease and consent to you disposing of the goods.
  4. Hired equipment – there may be larger items like printers and forklift trucks which are owned by third parties. If the tenant is unwilling to arrange for hired equipment to be collected, then you should make efforts to ascertain the owner by looking up models and serial numbers. If the third party isn't being paid by the tenant, then they will probably be keen to collect their property as soon as possible.
  5. If the lease doesn’t specify how to deal with abandoned property, and you get no engagement from the tenant, then by law, you have a duty to take reasonable care of the goods and make a report to the Police.
  6. Taking reasonable care of abandoned goods can be an unwanted expense. If you make a report to the Police and decide to nonetheless dispose of the goods rather than incur the storage costs, keep a clear record of the goods, have them valued, and sell them on the open market if they have value. Often an auction is the best option. If they have no value and your only option is to destroy them, have confirmation from an independent third party that they have no value. The risk in disposing of the goods is that the tenant comes after you for their value, so by taking these steps, you put yourself in the best possible position to defend that claim.

    What should you do if the tenant goes into liquidation or administration?

    1. Write to the tenant's insolvency practitioner and ask them to uplift any goods or seek confirmation that they are content for you to dispose of them. Unless there are high value items which can be sold to raise funds for creditors, then you often find that the liquidator or administrator will say that the goods are abandoned and can be disposed of.
    2. If there are items worth selling then consider Landlord's hypothec – this is a right of security over a tenant's moveable property kept in leased premises. The insolvency practitioner should not remove goods without your permission and you should be entitled to the proceeds of sale as payment towards the tenant's rent arrears. You can read more about landlord's hypothec here.
    3. If the lease is still in place – check any provisions which determine how you should deal with abandoned goods.
    4. Ask the insolvency practitioner to give you a list of hired goods at the premises so that you can arrange for collection, or verify any third party owners seeking access to the premises to uplift their equipment.

    If you need advice about abandoned goods then please get in touch with our Real Estate Litigation team or your usual Brodies contact.

    Contributor

    Gareth Hale

    Partner