By Liad Hadar, Director at Hadar Incorporated, Specialist Property Law Firm
This article first appeared in Asset Magazine’s May 2023 edition

The property market is a busy industry, with many landlords investing in properties to generate a steady income.

In a perfect world, this steady income directly results from a tenant signing a lease, occupying the premises, paying rent throughout the lease period, reinstating the premises and exiting at the end date of the lease term.

As many of our clients have experienced, the reality is that certain tenants simply abscond during their lease period without notice or legal entitlement to do so.

I’ve recently seen an increase in tenants absconding and this caused me to write this article to assist landlords to turn a negative situation into a positive result.

This article discusses the legal framework surrounding tenants absconding, the consequences for landlords and the absconding tenants and the handling of abandoned goods left behind on the premises.

The effect of absconding

The lease agreement regulates the rights and responsibilities of both landlords and tenants, defining the obligations of the parties, requisite notice periods and consequences for non-compliance.

A tenant absconding is a material breach of a lease agreement. Such conduct amounts to a repudiation by the tenant.

A repudiation is a party’s refusal or inability to perform their contractual obligations, effectively communicating their intention not to be bound by the terms of the contract. Repudiation can occur either through words or actions.

When a tenant absconds and therefore repudiates a lease agreement, the landlord may choose to accept the repudiation and treat the lease agreement as terminated or reject it and insist that the tenant abide by its obligations. If the landlord accepts the repudiation, it can seek damages to compensate it for the losses caused by the repudiation.

Leverage Step 1:
The landlord should write to the tenant to confirm the repudiation and that the landlord accepts such repudiation.

The effect of this letter is that you have protected your legal position and effectively cancelled the agreement on the basis of the absconding tenant’s repudiation such that the absconding tenant has no legal rights whatsoever and faces the consequences of its actions.

Consequences of absconding

A tenant who absconds from a premises without fulfilling the terms of a lease agreement and whose repudiation has been accepted by the landlord is liable for the remaining rent and other relevant charges until the end of the lease period or until a replacement tenant is found, whichever the lower.

In the case of a replacement tenant being found but at a lesser rental, the tenant will be liable for the shortfall in rental until the end of its lease agreement. The formula for this is simply:

Absconding tenant’s rental – replacement tenant’s rental = shortfall in rental.

The shortfall in rental will then be multiplied by the number of months remaining on the absconding tenant’s lease agreement, providing the landlord with its quantified damages claim.

The absconding tenant is also liable for any additional damages caused by its conduct. By example, the absconding tenant could be liable for agent’s commission for finding a replacement tenant, reinstatement of the leased premises (if it did not attend to it) or any other additional charges incurred by the landlord which would not have been incurred but for the tenant’s conduct.

The Landlord’s rights regarding abandoned goods

When a tenant absconds, they often leave behind personal belongings and property. Before taking any action, landlords must follow the due process outlined below:

Leverage Step 2:
Send a notice regarding the abandoned goods to the absconding tenant as soon as possible.
The landlord must send a written notice to the absconding tenant informing them of the abandoned goods and requesting them to remove the items within a specified and reasonable period. The landlord should also warn the tenant that failure to remove the goods will result in the landlord disposing of them as it deems fit.

This notice should be sent to the absconding tenant’s last known address, by email and, if possible, by Whatsapp to ensure that it is received.

If the absconding tenant fails to collect its belongings within the specified period, the landlord has the practical options of storing the goods or disposing of them. Either way, the landlord should compile a detailed inventory of the items, preferably taking photographic and/or videographic proof.

The landlord can then either store them in a safe and secure location and continue to chase the absconding tenant to collect them, in which case it may seek to charge the absconding tenant reasonable storage fees for this, which can be claimed as part of the damages referred to above.

Alternatively, in theory, the abandoned goods can be sold by the landlord and the monies raised allocated toward the arrears and damages owed.

If the landlord follows the notice procedure and has taken all reasonable steps to arrange for the absconding tenant to remove the abandoned goods, the landlord could dispose of the goods as it deems fit. This could include the sale of the assets or simply removing them from the premises. This step however should only be taken after consulting with a Property Law Specialist as the landlord may be held liable for any wrongful disposal or sale of the tenant’s property.

The other, safer, option available to landlords is to issue legal action against the tenant, obtain judgment and then instruct the Sheriff to remove and sell the goods in a judicial sale in execution. Although removing all risk, the issue with this is that the goods will either remain on the premises (thus depriving the landlord of its ability to re-let the premises to a replacement tenant) or in storage (thus incurring substantial fees which may never be recovered) until such time as the judgment is granted.

Conclusion

Dealing with tenant absconding can be a complex and challenging process for landlords. It is essential to understand your legal rights and follow the correct procedures to protect your interests, using leverage steps 1 and 2 above as soon as possible.

If you are facing a situation where a tenant has absconded, it is crucial to seek professional legal guidance to not only protect your property asset value and interests but also to consider the risks involved in dealing with abandoned goods.

As always, we invite landlords to contact our Team for help in navigating the complexities of tenant management and to safeguard your property investments.