Pointon Partners' regularly advises commercial landlords and property managers on their rights and obligations when a lease is terminated. A recent decision of the Victorian Civil and Administrative Tribunal (VCAT), Cristiano v Prime Kwality Foods Pty Ltd [2025] VCAT 580, is a timely reminder of the legal and financial risks associated with retaining the tenant goods following lease termination -even where the tenant owes substantial rent arrears.
What happened?
In Cristiano, the landlords terminated a commercial lease over a warehouse following repeated non-payment of rent. The landlords re-entered the property. Following the re-entry the tenant, a food distribution business, left behind a substantial quantity of business property, including:
- Perishable and non-perishable inventory stock
- Commercial racking and shelving
- Welding gloves and protective apparel
- A forklift and a delivery van.
The landlord, through their managing agents, refused to allow the tenant to retrieve the goods unless rent arrears were paid. Over time, they moved the goods into commercial storage, sold some items and treated others as abandoned.
The tenant brought a counterclaim alleging that the landlords had unlawfully retained and converted its goods.
The Tribunal's findings
Senior Member Edquist found that:
- The lease was terminated when the landlords re-entered the premises, and from that point on, their continued possession of the tenant's goods was not legally justified.
- The landlords' conduct amounted to conversion, which is a common law tort that arises when someone deals with another party's goods in a way that is inconsistent with that party's legal rights.
- The longstanding practice of distress for rent has been abolished in Victoria since 1948. A landlord cannot lawfully retain or sell tenant property as leverage for unpaid rent following the termination of a lease.
- The landlords could not rely on the lease or the Australian Consumer Law and Fair Trading Act 2012 (Vic) because they had prevented the tenant from retrieving the goods in the first place.
Financial consequences
The Tribunal awarded the landlords approximately $19,560 in respect of their claim for unpaid rent and associated costs. However, the tenant's counterclaim succeeded, and the landlords were ordered to pay $98,827.27 in damages for conversion. This was more than five times the value of the landlords' claim.
Damages for conversion were assessed based on the value of the goods at the time they were wrongfully withheld. The Tribunal also considered consequential loss in some cases, such as where perishable goods had deteriorated in storage or where items could not be recovered or resold.
Key Takeaways
- Do not retain or dispose of tenant property to recover unpaid rent. This is unlawful and may expose you to significant liability.
- Provide tenants with a fair and genuine opportunity to retrieve their goodsafter re-entry.
- Seek legal advice before placing goods into storage, asserting any lien, or arranging a sale.Acting without proper authority can give rise to expensive legal claims.
- Lease provisions and consumer law rights will not protect landlords who prevent tenants from accessing their property.
- Keep thorough records of all communications and ensure any conditions imposed on a tenant are lawful and clearly documented.
Landlords are responsible for their agents' actions
The Tribunal held the landlords were responsible for the actions and communications of their managing agents, as the agents acted with actual authority. Depending on the particular facts landlords may have recourse against the agent for any losses incurred because of the agent's actions, but this does not relieve landlords of their responsibility to the tenant.
It is therefore critical that managing agents understand the relevant laws and act cautiously - if agents are unsure, they should promptly seek legal advice to avoid exposing both themselves and their landlords to significant risks.
Avoiding costly mistakes
This decision is a clear reminder that even significant rent
arrears do not justify holding on to a tenant's goods without a
lawful basis. In Cristiano, the damages awarded to the
tenant far exceeded the amount of unpaid rent.
Apparently rational but unlawful actions by landlords or their agents can result in serious financial consequences.
Please contact Carl Millington with any query regarding this article or leasing disputes generally.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
