Bailment – can you bail out?

JaneBloome1365065937-x0y4x1304y1629-181x226r100We are delighted to welcome Jane Bloomer to the blog. Jane is Director of Property Litigation at Howes Percival in Northampton where she advises clients in relation to all aspects of real estate litigation matters. She has particular expertise in landlord and tenant issues and possession claims and has a wide range of clients both commercial and residential.

Picture the scene – you are the landlord of a commercial unit and the tenant has vacated the premises on time. Great! Now all you have to do is re-let the unit – simple!  However when you inspect the premises, you come across items left by the tenant. Items can be anything, from bin bags of rubbish to expensive equipment. One particular landlord discovered the entire arena used for the TV production “Robot Wars” in a large disused hangar.  (Robot Arenas Limited v Waterfield and Others [2010]).

So, what can you do?

The Law

The law of “bailment” deals with the situation where a person, (the “bailee”) is voluntarily and knowingly in possession of goods that belong to another, (the “bailor”). A landlord in possession of goods belonging to a tenant will be an “involuntary bailee”, as they have not consented to taking possession of the goods. Nevertheless, the landlord is obliged to:

  • Not deliberately or recklessly damage or destroy the goods; and
  • Take care if returning the goods to the owner that they don’t belong to any third party.

What about the Lease?

A clause in the lease may deal with the situation. For example, the lease may oblige the tenant to remove standard items at the end of the term, and specify what the landlord is entitled to do with any items left at the premises. However, if the lease is silent, the items remain the property of the tenant. In such a case the landlord must comply with his obligations as an “involuntary bailee”.

What can the Landlord do?

There may be adverse consequences if a landlord disposes of goods he does do not own. If a landlord can establish that the true owner of the goods has abandoned them, the landlord is free to deal with them. However this can be tricky to find out, because unless the tenant indicates otherwise, the tenant may return to collect the goods at a later date.

The law does not expect an “involuntary bailee” to hold onto someone else’s property indefinitely. A landlord is required to take all “reasonable steps” to establish that the goods have been abandoned, which includes trying to notify the former tenant that they left their goods behind. It is advisable to follow the procedure in Schedule 1 of the Torts (Interference with Goods) Act 1977, which requires notice to be served on the tenant. The notice should require the tenant to collect the goods, and be accompanied by a second notice to inform the tenant that the landlord intends to sell the goods if they are not collected. This should be sent by special or recorded delivery to the tenant so that proof of service can be relied upon at a later date if necessary. If the tenant has vanished without a trace, the landlord must attach the notice to the premises where the goods were left, ensuring that the notice is visible.

The notice must set out the following:

  • The name and address of the landlord;
  • Sufficient details of the goods (an inventory would be ideal);
  • Where the goods are kept;
  • Whether the goods are ready for delivery to the tenant;
  • Any amount payable to the landlord in respect of the goods, e.g. cost of removal or storage;
  • If the goods are to be sold, where and when the sale will take place; and
  • Attach a schedule of the goods which remain at the premises.

If the former tenant receives the notice but fails to comply with it, or all reasonable steps have been taken to contact him, the landlord is free to assume that the goods have been abandoned and can dispose of them, sell them or deal with them as he wishes.

In the recent judgment of Campbell v Redstone Mortgages Ltd [2014], the court confirmed that an involuntary bailee is only obligated to do what is right and reasonable in all the circumstances. In this case, a tenant brought a claim against a mortgage lender for disposing of her goods after the property she was renting had been repossessed. The court found that the tenant had left goods at the premises deliberately in order to prevent the lender from having vacant possession. The tenant was given three separate opportunities to remove her goods from the premises but failed to do so. The lender was found to be justified in disposing of the tenant’s items, as this was right and reasonable in all the circumstances given the tenant’s behaviour.

What are the risks?

If a landlord sells, or otherwise disposes of a tenant’s goods without following the above procedure and the tenant then claims to have wanted the items, the tenant may be entitled to bring a claim against the landlord for damages. The tenant is entitled to sue for the value of the goods, but not the amount it would have cost to buy replacements.

Therefore, our ‘Top Tips’ for landlords:

  1. Establish what the items are. If the items are fixtures and form part of the premises, they will belong to the landlord regardless of who installed them. However, if the items are loose, or “chattels”, they belong to the tenant and the landlord should proceed with caution.
  1. Produce an inventory of the items left at the property as soon as it is evident that the tenant has vacated. If possible, this should be carried out by two people to minimise the ability of the tenant to dispute what items were left. This inventory should be as detailed as possible and photographs are better evidence in any potential claim than a handwritten list.
  1. Document all action taken in attempting to notify the tenant of the items left. This will provide evidence to establish that the landlord was entitled to assume the goods had been abandoned if it is necessary to defend a claim brought by the tenant.
  1. Obtain written evidence from any third party who lays claim to the goods, which confirm that either they have ownership of the goods or have authority to collect the goods on behalf of the owner.
  1. Consider the risk. The greater the value of the goods, the greater the risk to the landlord that the tenant may bring a claim. It may be worth taking out temporary insurance to cover the value of any loss or damage to high value items.
  1. Draft a clause in future leases which sets out exactly what will happen to goods left at the premises.

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About Laura

Laura looks after Neil Mason Associates' marketing and PR, including the company's online and social media presence. When she's not working, she's likely to be found running after her two small girls or out on Warwickshire's country lanes on her bike.

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