Landlord’s possessory lien over tenant’s goods

In an interesting recent decision, Garde J in the Victorian Supreme Court:

  1. confirmed that distress for rent remains abolished in Victoria, despite the repeal of the Landlord and Tenant Act 1958 (Vic); and
  2. found that a lien in a lease over goods left behind by a tenant is effective, provided that it crystallised after re-entry and termination of the lease.

Distress for rent was an ancient self-help remedy that allowed landlords to seize and sell tenant’s goods on the leased premises to satisfy unpaid rent.  The remedy is called ‘distress for rent’ and the act of seizing and selling the tenant’s goods is called ‘distraining for rent’.  The remedy was only available to the landlord before termination of the lease.  Distress for rent was abolished in Victoria in 1948 in provisions that were replicated in the Landlord and Tenant Act 1958 (Vic).

In Asian Pacific Building Corporation Pty Ltd v Sharon-Lee Holdings Pty Ltd [2013] VSC 11, Garde J confirmed the widely-held view that the repeal of the Landlord and Tenant Act 1958 (Vic) did not revive distress for rent and that the remedy remains abolished in Victoria.

However, the landlord in that case held a lien over the tenant’s goods left at the premises that crystallised after the landlord re-entered the premises and terminated the lease.  Consequently, the lien was not characterised as distress for rent and Garde J held that the lien was effective against the tenant’s goods.

The Tribunal held that the lien was void as against public policy.  That argument was rejected by Garde J and the Tribunal’s decision was overturned.

It is standard practice for leases in Victoria to deem goods left behind by the tenant to be abandoned and often to vest ownership of the abandoned goods in the landlord.  If the clause is enforceable and the tenant simply abandons its goods, a lien is probably does not assist the landlord.

However, a lien over the tenant’s goods could be useful if the goods are valuable and, for example:

  1. the tenant tries to remove them after the lease has been terminated;
  2. the tenant’s financier tries to execute a charge over the tenant’s goods;  or
  3. the tenant’s Liquidator tries to remove the goods after the lease is terminated.

Consequently, practitioners acting for landlords should consider updating their precedents to include a lien in similar terms to the lien in the Sharon-Lee Holdings case.

The text of the lien is extracted at paragraph [12] of the judgment.  However, although the Court upheld the lien, it was critical of the way in which it was drafted (see paragraph [62]).  Accordingly, practitioners should not slavishly copy the form of lien considered in the judgment.

It is important to note that the lien must take effect after termination of the lease in order to avoid being characterised as distress for rent.

Consideration should also be given to registering the lien on the Personal Property Securities Register.

Thanks to Jamie Bedelis of Moray and Agnew for drawing my attention to this case and for his valuable input in discussing this post.

About Sam Hopper

Sam is a property and insolvency barrister.

View all posts by Sam Hopper

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