Usually, when a house changes hands through sale, the outgoing Seller does the right thing and makes sure that all of their personal goods, chattels, furniture etc are completely removed and the house is left clean and clear ready for the Buyer to move in. In circumstances however where the Seller has left goods or chattels behind, what are the competing rights and responsibilities which fall to the Buyer on taking possession of the property.
The answer to this question depends on a process of elimination and therefore is best given as a check list.
First, is the relevant item(s) a “fixture” or a “chattel”? If it’s a fixture then title to it passes automatically with the land and therefore the Buyer becomes the owner of the item on settlement. From there, the Buyer has the right to retain, sell or “junk” the item but has no right to demand any compensation from the Seller for any cost or inconvenience incurred. Determining whether an item is in truth a fixture or a chattel is not always easy but the generally accepted rule is that if it can be removed without damaging any structure against which it rests or to which it is attached, then it is a chattel. If not it is a fixture.
Second, if the item is a chattel, does it actually belong to the Seller or does it belong to a third party (for example, a tenant) or is it an item against which money is still owed under a chattel lease/mortgage or other secured facility? In either scenario, the Seller’s abandonment of the items does not bestow outright ownership of it onto the Buyer. In a third party scenario, ownership of the item remains with that third party and the property Buyer is said to become a “bailor” for the item on their behalf. If the item was under finance then the Buyer’s Solicitor can make a search under the new Personal Property Security Act 2009 (PPSA) before settlement to discover this and the Finance Company will then have the usual rights of repossession of the item under the original credit contract. These rights trump any attempt by the Seller to actually convey title for the items to the Buyer and so the Buyer should not in any such circumstance attempt to pay the Seller for ownership of the item until the creditor is paid out in full.
Third, according to case law (see Cumberland’s case), any contract for the purchase of land has within it, an implied term that the Buyer will be entitled to take “vacant possession” of the property on settlement. Consequently, if the quantity of furniture/chattels, rubbish or other items left upon the property is so extensive so as to create a substantial physical impediment to the Buyer’s ability to occupy and enjoy the property then the Buyer has a strong argument to refuse to settle the contract and terminate it on the basis of “fundamental breach”. Where the items do not amount to such an impediment to use of the property however, the Buyer’s rights will depend on a combination of any specific terms that were actually written into the land purchase contract and the law of “bailment”.
Fourth, was the item in question actually buried or hidden in some other way such that it was not obviously left out in the open available to be seen and/or taken? In situations such as this, there is an overriding principle of law that the item cannot be deemed to have been abandoned to the Buyer and the Buyer will not in those circumstances be deemed to gain any immediate ownership of the object or right to deal with it and will instead be obligated to hold the item on behalf of the true owner as a “bailor”.
Fifth, where the item is not a fixture, does not belong to any third party or creditor and was not buried or hidden in any way then it’s fate in regard to both ownership and the competing obligations of Seller and Buyer as to who it/they are dealt with will usually then depend upon the terms of the particular contact.
- If the contract says nothing on the subject the buyer is back to the situation of a “bailor”.
- If the Contract is in a standard REIQ (Residential) form then under its standard terms, any chattel item (including any fixture which the Seller might have “reserved” for them to retain) is forfeited to the Buyer if not removed before settlement. With this therefore the problem is usually easily fixed. If however the Buyer agrees to give the Seller extra time following settlement to remove some chattels, then it will be imperative in that Agreement that there also be an express provision to say that failure by the Seller to remove the items by the extended date will again result in forfeiture of ownership to the Buyer. If this additional clause is not inserted then the Buyer arguably cannot rely upon the standard forfeiture provisions in the REIQ Contract and will instead be said to be holding the item on behalf of the Seller again as a “bailor”.
- If the Contract is in a standard REIQ (Commercial) form then under its terms, again a similar forfeiture of chattels and reserved fixture items is prescribed however, unlike the residential version, the commercial contract contains within it an ability for the parties to agree to the contrary. It is therefore imperative for commercial contracts that there not be any special conditions or side agreements relating to chattels that can be interpreted to change this position and if there are to be such agreements then, the parties should be very clear about the situations in which title will be forfeited to the Buyer in the same way suggested for a delayed collection of chattels in a residential contract scenario.
Sixth, where the former property owner has actually died or is alive and well but has been ejected from the property due to a bank foreclosure or a bankruptcy, abandoned chattel/furniture is generally at higher risk. The Buyer’s rights and responsibilities in these scenarios differ according to circumstance. Whilst a Bank acting under a mortgagee power of sale or a Trustee in Bankruptcy commonly do have an ability to legally remove the offending items, typically they will do nothing and instead place a clause into the Sale Contract which says that the Buyer will be taking the property “as is where is” meaning any furniture, chattels or non-fixed items left on the property will be the Buyer’s problem with no comeback against the Bank or Bankruptcy Trustee. The Buyer’s problem in this situation is that they now become a “bailor” for the abandoned furniture and chattel items. Where the sale is being effected by a deceased estate, the Executor(s) of the deceased person will assume exactly the same responsibilities as if he/she/they was/were the property owners all along. Usually Executors diligently attend to the removal and distribution of all of the home’s contents to the rightful Beneficiaries named in the deceased’s will but occasionally family squabbles cause this to fail leaving a buyer potentially faced with receiving a house full of the deceased’s former possessions. Ultimately though, the Buyer is entitled to demand that the Executor(s) do their job and will be entitled to claim the standard chattel forfeiture provisions under the REIQ Contract if they do not.
Finally, in any circumstance where the Buyer ends up becoming “bailor” for the goods by virtue of any of the scenarios set out above, the Buyer gains absolutely no entitlement to sell, use or otherwise dispose of the goods without the specific authorisation of the owner. If the goods are damaged in any way where it could be shown that damage could be avoided if the Buyer had exercised more reasonable care, the Buyer can become liable to the owner for the cost of repair or replacement of the items. The Buyer is obligated to ensure that the relevant goods are securely stored so that they are not susceptible to theft, damage or destruction by persons or natural elements and if the Buyer incurs any costs, (eg. a commercial storage fee) then the Buyer can insist on reimbursement of that cost from the Seller before returning the goods. If no reimbursement is made the Buyer can sue the Seller for those costs, obtain a judgment and press the matter through to an enforcement or even bankruptcy in which case the items themselves can be sold to cover the storage cost. If the Buyer knows where the owner of the goods is either presently living or otherwise storing their possessions, the Buyer is entitled to transport the goods (in an appropriately safe way) to that other location and deliver the goods there at which point the bailment obligations are discharged.
As can be seen, being stuck with “bailment” obligations will cause significant grief for any Buyer. Avoiding the problem however can almost always be achieved by using a standard REIQ contract and not agreeing to special conditions or arrangements in regards to the seller’s furniture and chattel items.
Michael Zande is the Principal of Zande Law Solicitors, with 25 years experience in practice. Michael and his team have had extensive experience in conveyancing matters. Please feel free to review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.