Landlord’s possessory lien over tenant’s goods

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.[1]

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.

[1] But see G M & M Y Campbell & Co Pty Ltd v I S Cotton & Anor (unreported, Supreme Court of Queensland, Full Court, Williams, Derrington and Ambrose, JJ, 18 October 1991, BC9102528) in which the Court held that a clause deeming goods to be abandoned by the tenant was unenforceable as a penalty.