Locked out: at what cost to Landlords?
Bradley Allen Love recently obtained a six figure judgment debt for a tenant who had been locked out of his Fyshwick premises, unlawfully, for failing to pay rent. The proceedings involved a number of claims, including a claim for damages for conversion and detinue of goods – being the wrongful dealing with and detention of another’s goods. The claim was defended by the landlord on the basis that the lease had been properly terminated and so the lockout was lawful.
The ACT Magistrates Court decision, Biedrzycki v Bird & Smith  ACTMC 8, contains a number of important lessons for both tenants and landlords of commercial leases.
Payment of Rent
During the term of the lease, the tenant withheld rent payments on the basis that he was unable to conduct his business due to flooding and an inoperable door to the premises. The non-payment of rent gave rise to a purported notice of termination. Although the tenant contested the termination, the Court held that the landlord was entitled to terminate the lease by reason of the failure to pay rent – a fundamental breach.
Importantly, under ACT tenancy laws, a tenant must not refuse to pay rent if they are able to fully or partially use the leased premises for their normal purpose. Instead, tenants may make an application to the Court to seek relief, if it is necessary to do so. Put more directly, tenants do not have the power to self-assess what discount they should be entitled to. Absent agreement from the landlord, the court should be applied to for a determination of the dispute.
Conversion and Detinue Claim
After lockout, the landlord did not allow sufficient access for the tenant to recover his goods and equipment from the property. When the tenant was later granted access once more, some 85 items were missing. During the lockout period, the landlord was the only party with access to the premises.
The Court found that there must be a balanced approach in considering the reasonableness of access to recover property. For the majority of the goods, the court held that conversion was not upheld, as access was ultimately provided by the landlord. However, the 85 missing items were another matter.
The Court found the landlord liable for the replacement cost of the 85 missing items, stating that the landlord was reckless in failing to keep the premises secure, and therefore assumed liability for those losses. While the evidence did not reveal what happened to the missing items, as the only party with access to the premises, the landlord assumed some responsibility to keep the premises secure and act reasonably to allow the tenant access to recover the goods. By failing to do so, the landlord was ordered to pay the tenant $150,000 – albeit the case that the quantum of this award has been appealed to the Supreme Court, with further judicial consideration to follow.
A lease, like any other contract, must be performed according to its terms. The ordinary principles of contract law apply to leases, including principles of termination for breach of contract. However, even if a lease is properly terminated, the relationship between the landlord and tenant may not yet be. Landlords should take care to ensure that they do not assume liability for unrecovered goods when locking tenants out of premises. Where this may occur, ensure you act reasonably by:
- properly securing the premises;
- negotiating appropriate access to minimise the risk of property loss; and
- surrendering goods upon lawful and reasonable demand.
What is reasonable will depend on the circumstances. If you are unsure, we recommend you seek legal advice. A failure to do so may be costly.
If you have any questions about failure to pay rent, or what your options are, please get in touch with our Litigation team.