Dealing with an Insolvent Tenant’s Goods left in Vacant Premises

The situation

When a landlord recovers possession of premises from an insolvent tenant, there are often goods left in the premises.

The landlord will become involuntary bailee of the goods, which carries certain limited duties, including not to damage or destroy the goods, but entitles it to take reasonable action to dispose of the goods.

Determining what action is reasonable may be difficult and poses a risk of liability in the tort of conversion.

Depending on the nature of the tenant’s business and the goods left, these may range from low-value items (e.g. stationery), to high value items (e.g. plant/machinery) which may be third party owned. This will be relevant to what action the landlord can reasonably take.

Dealing with disposal of the goods can often be logistically difficult, so engaging bailiffs/agents to manage the process can be beneficial.

Solutions – Torts Act notices

The landlord may be able to maintain that the goods have been abandoned, but a common protective step for landlords to take to assist in establishing that is to serve notice under the Torts (Interference with Goods) Act 1977 requiring the tenant or any third-party owners to collect the goods and notifying them of an intention to otherwise dispose of the goods.

A schedule of goods will be attached to the Torts Act Notice served on the tenant and anyone else who it is known may have an interest in the goods.

If the goods are not collected within a reasonable time of giving notice, the landlord may sell or dispose of the goods as appropriate, deduct any expenses of sale and storage, and hold the balance on trust for the tenant or third party owner.

Specialist goods (e.g. motor vehicles) may also be subject to additional statutory restrictions.

In some cases, particularly where there are high value items, seeking the court’s authority to sell may offer greater comfort to a landlord.

Solutions – contractual provisions

The lease may contain an obligation for the tenant to remove all goods from the premises on lease expiry, and may contain a deemed abandonment provision in relation to goods left in the premises, coupled with a landlord’s right of sale. Legal advice should be sought before relying on one of these clauses.

A Torts Act notice could be served in parallel with reliance on a contractual provision for additional protection.

Additional issues

If the landlord intends to relet the premises immediately after it has regained possession, it will need to move and store the goods securely off the premises.

If the new tenant wants the goods, the landlord should still consider serving a Torts Act Notice and should agree contractual terms with the new tenant which protect its position if the goods are claimed by the insolvent tenant or a third party.

If the tenant company is subsequently dissolved, any land or chattels it owned prior to dissolution that have not been disposed of will become vested in the Crown as “bona vacantia”.

The Crown can sell or disclaim any assets as it sees fit and almost always chooses to disclaim ownership.

Any Torts Act Notice (or other notices) should be served on the insolvent company, any insolvency practitioner appointed and, following a dissolution, the Crown.