The story: A tenant renting an office did not have enough sense to move out quietly in the dead of night or over a long weekend after not paying the rent for months. The tenant held out intransigently because it had either nowhere else to go or nowhere else to put its stuff. The court gave an order with a writ of possession. The sheriff accompanied the landlord to the property, the tenant wasn’t there, and the locksmith changed the locks. To the landlord’s surprise, the office is full of furniture, decor, and books. The tenant owes $3,000 in back rent and $1,000 in court costs and attorney’s fees. What should the landlord do with this bonanza of business property?
Under Ark. Code Ann. 18-16-108, “[u]pon the voluntary or involuntary termination of any lease agreement, all property left in and about the premises by the lessee shall be considered abandoned and may be disposed of by the lessor as the lessor shall see fit without recourse by the lessee.” This statute was upheld in Omni Holding and Development Court v. C.A.G. Investments, Inc., 370 Ark. 220, 258 S.W.3d 374 (2007). In this case, the court ruled that upon the issuance of the writ of possession, the property became abandoned. This means that the tenant has only until the judgment (or if an appeal is taken any time during the staying of the judgment) to remove property on the premises. After that, it’s too late.
The hypothetical landlord sells the office furniture, book, and decor to a new tenant for $1500. If our hypothetical tenant owes a $4,000 judgment, then what, if any, affect does the landlord’s sale have on the judgment???
Tough question. Part (b) of 18-16-108 states that “[a]ll property placed on the premises by the tenant or lessee is subject to a lien in favor of the lessor for the payment of all sums agreed to be paid by the lessee” Did the General Assembly intend that part a of the statute (abandonment) work in concert with part (b) (lien)? I could argue either way. My argument that the landlord has no duty to utilize the proceeds of the sale is that part a uses “abandoned” as the property’s status and the landlord can dispose of the property “without recourse.” The legal term of art “abandoned” at common law means that one finding property becomes the owner. Thus, by using this term of art, the General Assembly meant that the Landlord is literally the owner of the property. The “without recourse” provision redoubles this interpretation.
On the other hand, I can argue part (b) should read with part (a) because there is nothing in the remainder of the Arkansas Code that tells the would be lien holder landlord how to foreclose upon the lien created. I suppose that the argument is that part (a) and part (b) together create a type of bailor-bailee relationship. This would allow the landlord to make a commercially reasonable sale.
The stronger argument is the first. To impute a bailor-bailee relationship such as a pledge is to impute the commercially reasonable sale requirement. How can the requirement for a commercially reasonable sale exist when the statute specifies that the disposal of the property is “without recourse?” A court could get there, but it will require legal gymnastics to get there.
I think this question is an academic one that may never be answered by the courts. Practically, no person with any common sense will leave anything valuable on the premises. They might leave a liability (like some junk), but nothing that will bear fruit for the repossessing landlord. In the rare cases they do, the value of the property pales in comparison to the judgment for back rent and the landlord doesn’t want to spend money to collect the judgment, so any serious consideration of whether to credit the judgment never occurs. The landlord just takes or sells the property and leaves the judgment standing until it dies 10 years hence.
Thanks for reading. Don’t take anything above as legal advice. Every situation is different and there subtleties that I didn’t address, so what you’ve read is very, very general and generic and may not apply to your situation. If you have the need for representation, give me a call at 501-251-1076. I accept landlord tenant cases including evictions in the Central Arkansas area including, Pulaski County, Lonoke County, Saline County, Faulkner County, and Perry County. This includes the Little Rock, North Little Rock, Bryant, Benton, Conway, Mayflower, Perryville, Lonoke, Sherwood, Jacksonville, and Cabot metropolitan areas. In general, I don’t represent tenants that are individuals unless there’s a serious problem with the premises or the landlord’s behavior. With businesses tenants, I will take tenant work on a case by case basis. Landlords are almost always welcome. Call me at 501-251-1076.