It’s a scenario every commercial landlord dreads. A tenant defaults on rent, the lease is terminated, and upon re-entering the premises, you discover a warehouse full of the tenant’s property. Faced with significant financial losses, the temptation to seize those assets—to hold them as leverage or sell them to recoup unpaid rent—can be overwhelming.
However, a recent ruling by the Victorian Civil and Administrative Tribunal (VCAT) serves as a stark warning: what might seem like a practical solution is, in fact, illegal and can lead to devastating financial consequences for landlords. This article explores the legal landscape for Victorian landlords dealing with abandoned goods and outlines why a landlord must never take possession of a tenant’s property to satisfy a debt.
A Cautionary Tale: Cristiano v Prime Kwality Foods Pty Ltd
The VCAT case of Cristiano v Prime Kwality Foods Pty Ltd [2025] VCAT 580 provides a powerful illustration of the risks. In this matter, the landlords terminated a commercial lease after the tenant repeatedly failed to pay rent. Upon re-entry, they found a significant amount of the tenant’s business assets, including inventory, commercial equipment, a forklift, and a delivery van.
The landlords refused to allow the tenant to retrieve the goods until the outstanding rent was paid. Over time, they moved the items to storage, sold some, and disposed of others. The tenant lodged a counterclaim, arguing the landlords had unlawfully retained and sold their property.
The Tribunal found decisively in the tenant’s favour. It ruled that the landlords’ actions were unlawful and constituted the tort of conversion. In a stunning outcome, the landlords were ordered to pay the tenant $98,827.27 in damages—a figure more than five times the amount of their original claim for unpaid rent.
Key Legal Principles All Victorian Landlords Must Know
The Cristiano decision underscores several critical legal principles that every commercial landlord and property manager in Victoria must understand:
- “Distress for Rent” is Abolished: The ancient common law right of a landlord to seize a tenant’s goods to recover rent arrears, known as “distress for rent,” was abolished in Victoria in 1948. It is unequivocally illegal for a landlord to hold, sell, or otherwise dispose of a tenant’s property to compel payment of rent.
- The Tort of Conversion: When a landlord intentionally deals with a tenant’s goods in a manner that is inconsistent with the tenant’s ownership rights, they commit the tort of conversion. This includes refusing the tenant access to their goods, moving them without authority, selling them, or otherwise treating them as their own. The landlord’s intention is key; the act must be deliberate.
- Lease Clauses Are Not a Defence for Unlawful Acts: Landlords cannot contract out of the law. In the Cristiano case, VCAT determined that the landlords could not rely on clauses in the lease or the Australian Consumer Law and Fair Trading Act 2012 (Vic) because they had unlawfully prevented the tenant from collecting their goods. A landlord cannot create a breach by preventing a tenant from fulfilling their obligations and then seek to rely on that breach.
- Principals Are Liable for Their Agents: The Tribunal confirmed that the landlords were legally responsible for the actions of their managing agents. It is crucial that both landlords and the agents they appoint are fully aware of their legal obligations. Ignorance of the law is no excuse and will not shield a landlord from liability.
What Should a Landlord Do? Best Practices for Handling Abandoned Goods
To avoid the costly errors seen in the Cristiano case, Victorian landlords should follow these steps when a tenant leaves goods behind after a lease termination:
- Provide a Genuine Opportunity for Retrieval: The landlord must give the tenant a clear and reasonable opportunity to retrieve their property. This opportunity cannot be conditional on the payment of outstanding rent or other unlawful demands.
- Follow the Australian Consumer Law and Fair Trading Act 2012 (Vic): This Act provides a specific legal framework for dealing with uncollected goods. However, a landlord can only rely on this legislation if they have not obstructed the tenant’s right to collect their property in the first place.
- Document Everything: Maintain meticulous records of all communications with the tenant regarding the collection of their goods. Ensure any conditions imposed are lawful and clearly documented in writing.
- Seek Immediate Legal Advice: Before moving, storing, or disposing of a tenant’s goods, contact a legal professional. Acting without clear legal authority is a high-risk strategy that can lead to expensive and stressful litigation.
Conclusion: A Costly Mistake to Avoid
The Cristiano case is a clear and potent lesson for Victorian landlords. While dealing with rent arrears is frustrating, resorting to self-help by retaining a tenant’s goods is a recipe for legal and financial disaster. The damages awarded for conversion can dwarf the original debt, turning a difficult situation into a catastrophic one.
The message from VCAT is unambiguous: do not, under any circumstances, use a tenant’s property as leverage for unpaid rent. By affording the tenant a genuine opportunity to retrieve their goods and seeking prompt legal advice from a firm like Hayton Kosky, landlords can navigate this complex situation lawfully and protect themselves from significant liability.