Holding a tenant's goods for failing to pay rent an expensive mistake for landlord

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The Victorian County Court recently held that a landlord cannot hold a tenant's goods until outstanding rent is paid.

Australia Real Estate and Construction

The County Court has held in a recent case that a landlord cannot hold a tenant's goods until outstanding rent is paid.

In brief

The County Court has held in a recent case¹ that a landlord cannot hold a tenant's goods until outstanding rent is paid.

The facts

The tenant operated a car maintenance repair business at a property it leased from the landlord.

The lease was terminated for non-payment of rent and the landlord took possession of the property.
The landlord refused to allow the tenant to collect its equipment until the outstanding rent was paid. The equipment held was tools, equipment and cars in various states of repair.
VCAT made an order requiring the landlord to allow the tenant to have access to its goods on a certain date.
Despite the VCAT order, the landlord refused to allow the tenant access to its goods until the outstanding rent was paid.

The Court

A failure to remove goods before the termination of a lease does not:
- bring about a change of ownership in favour of a landlord; or
- give the landlord the right to refuse access to the goods;

unless the lease clearly has a term to this effect.

The Court ordered that the landlord was to pay the tenant for the value of the goods held. This amounted to $101,460.
The Court also ordered that the landlord was entitled to a set off for the unpaid rent in the amount of $7,420.
The amount the Court required the landlord to pay the tenant was therefore $94,040 plus interest and costs.

Lessons

This was an expensive lesson for the landlord in this case, who was attempting to position himself to be paid the outstanding rent. The lessons coming from this case are:

Unless it is expressly written into the lease, a landlord cannot hold a tenant's goods regardless of whether there is rent outstanding.
Do not ignore orders from VCAT or any Court.
When terminating a lease, seek legal advice as to your rights and obligations.

Footnote

¹Katranis v Bahrou & D'Azzena [2019] VCC 602

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