Abandoned Property: Residential & Commercial Tenancies

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1 Residential & Commercial Tenancies By: Judy Cook Cook & Company, Ltd. Mentoring Property Managers Residential & Commercial All Rights Reserved. Page 1 of 16

2 Overview One of the most challenging tasks for a Property Manager is dealing with the personal property left behind by a tenant who has vacated a unit, whether residential or commercial. At the conclusion of this course, the participant will know he/she must turn to state and local laws for guidance in dealing with (1) abandoned real property, (2) abandoned personal property in a residence, (3) abandoned trade fixtures and personal property in a commercial unit, (4) abandoned vehicles, watercraft, and other property. Further, the participant will know the proper steps to take in dealing with abandoned property in the most common scenarios. Instructor Judy Cook Judy Cook is an author and instructor of pre-licensing and continuing education courses for Property Managers throughout the United States. She is actively licensed in Nevada as a Broker and Property Management Permit Holder, with over 25 years hands-on experience managing both commercial and residential properties. Judy began teaching, training, and consulting property management professionals in the early 1990s, and is well-respected as one of the industry s leading providers of timely and useful information to her students. Judy is an active member of the National Association of Residential Property Managers (NARPM), and an ITI and REEA-trained instructor. She has dedicated her professional efforts over the last several years toward enhancing the professionalism of the property management industry. Please note: Judy Cook is not an attorney. Nothing in this course is intended to be construed as legal advice. Please consult your own counsel on all legal matters. Residential & Commercial All Rights Reserved. Page 2 of 16

3 WHAT WE WILL COVER 3 Questions Residential & Commercial All Rights Reserved. Page 3 of 16

4 Imagine this scenario: IS THE HOME ACTUALLY ABANDONED? The tenant is delinquent in his rent payments. You drive by the property and notice the window coverings are all open you can clearly see into almost every room of the house. You park and get out of your car to inspect the property more closely, and a neighbor comes up and proceeds to tell you how the tenants moved out in the middle of the night a few weeks ago. Is it reasonable to consider the dwelling abandoned? Residential & Commercial All Rights Reserved. Page 4 of 16

5 ABANDONMENT OF REAL PROPERTY: COMMERCIAL Most states provide that the lease between a commercial landlord and tenant will govern the issue of abandonment of the premises. However, some states have adopted specific language addressing abandonment: Must the rent be delinquent? Residential & Commercial All Rights Reserved. Page 5 of 16

6 ABANDONED PERSONAL PROPERTY RESIDENTIAL Unless the tenant has clearly indicated (by written agreement) that his remaining personal property may be disposed of, most states require the landlord to hold the property on the tenant s behalf, and give proper notice before disposing of it. New Jersey A landlord who reasonably believes that a tenant left personal property, including manufactured or mobile homes, at the rental premises with no intention of asserting any further claim to the property, may presume the property is abandoned by the tenant and dispose of the property in the manner provided by this chapter, only if notice is first given to the tenant, as required by section 46A:27-4 Source: More information: New York There is no specific statute on property apparently abandoned after a tenant leaves possession of a rented property. The landlord's responsibility is to act "reasonably" under the circumstances. A landlord, however, cannot prevent the tenant from taking his property Source: Pennsylvania Within 10 days of relinquishing possession, the tenant must contact the landlord and state whether or not he/she intends to retrieve their property. If the tenant does not contact the landlord within 10 days, the landlord may, at his/her discretion, dispose of the property Source: sets-new-rules-for-tenants-abandoned-property Residential & Commercial All Rights Reserved. Page 6 of 16

7 What if there is food in the refrigerator? What does safe storage mean? Best practices for inventory and moving/storing personal property: Residential & Commercial All Rights Reserved. Page 7 of 16

8 Although some states and local jurisdictions have enacted laws addressing personal property abandoned in non-residential units, most allow the lease language to take precedence over any such law. What do your leases typically provide? Residential & Commercial All Rights Reserved. Page 8 of 16

9 ABANDONED VEHICLES RESIDENTIAL & COMMERCIAL New Jersey A vehicle which has remained on or along any highway or other public property or on private property without such consent for a period of more than 48 hours or for any period without current license plates shall be presumed to be an abandoned motor vehicle. Source: New York A motor vehicle shall be deemed to be an abandoned vehicle if left unattended for more than 96 hours on property of another, if left without permission of the owner. Source: Pennsylvania A vehicle (other than a pedalcycle) shall be presumed to be abandoned under any of the following circumstances, but the presumption is rebuttable by a preponderance of the evidence The vehicle has remained on private property without the consent of the owner or person in control of the property for more than 24 hours. Source: Residential & Commercial All Rights Reserved. Page 9 of 16

10 ABANDONED WATERCRAFT New Jersey A vessel left on public land, waterway, or private property without consent for a period of more than seven days, or which is submerged partially or completely into the water for any period of time, may be impounded if an official or law enforcement officer has reason to believe the vessel has been abandoned. Source: New York The sheriff of every county in which any wrecked property shall be found, when no owner or other person entitled to the possession of such property shall appear, shall severally take all necessary measures for saving and securing such property; take possession thereof, in whose hands soever the same may be, in the name of the people of the state; cause the value thereof to be appraised by disinterested persons, and keep the same in some safe place to answer the claims of the persons entitled thereto. Source: Pennsylvania Pennsylvania law refers to abandoned boats, but does provide a definition of abandoned boat or abandonment. A boat abandoned on private property or the waters immediately adjacent to such property for at least 3 months can be registered as an abandoned boat. Source: Residential & Commercial All Rights Reserved. Page 10 of 16

11 OTHER ABANDONED PROPERTY Suppose you refund a tenant s security deposit (residential or commercial), and the refund check is never cashed. A year goes by, and the outstanding check never clears the bank. What will you do? Residential & Commercial All Rights Reserved. Page 11 of 16

12 WHAT IS UNCLAIMED PROPERTY? Unclaimed property can be any money, financial asset or safekeeping contents owed to another business or individual. Property is considered abandoned when there has been no activity and/or contact with the owner for a specific period of time. The property type (and individual state laws) will determine the abandonment period. New Jersey The Unclaimed Property Administration (UPA) recovers and records abandoned or lost intangible and tangible property. The UPA s goal is to return this property to the rightful owner and/or heirs. NJ Unclaimed Property Statute states that property owners never relinquish the right to this property and that the UPA acts as a custodian until the property is returned. Source: New York The New York State Abandoned Property Law requires organizations to annually review their records and transfer accounts that have reached certain dormancy thresholds to the State Comptroller, who serves as custodian of the funds until they can be returned to their rightful owners. Source: Pennsylvania Pennsylvania s Law does not require holders to perform due diligence prior to reporting general ledger property, however, reasonable efforts to locate the owner are encouraged. Source: Residential & Commercial All Rights Reserved. Page 12 of 16

13 CASE STUDY You are a real estate licensee, and property manager. You ve been managing rental houses for a few clients, biding time until the real estate sales market regains momentum. It s been 4 years, and counting. You don t mind it that much. It s a steady source of income, and most days the job isn t that hard. Since so many of your former buyer-clients lost their homes in foreclosure or short-sales, they ve become your tenants! Randy Renter is one such tenant. He s a great guy; one you ve done business with a few times over the last 10 years. You had no hesitancy about renting to him, even though he short-sold his home. After all, he s certainly not alone in this real estate market crash! Randy has been renting from you for almost 4 months. The first couple of months were great no problems whatsoever. The 3 rd month, his rent was a week late. He explained the situation to you, and you collected the late charges, per the terms of his rental agreement. Today is DAY 10 of the 4 th month. Randy hasn t paid rent, nor has he called to ask you for leniency. You ve left a couple of voice mail messages, and sent an . None of your attempts to contact Randy have produced any response. You decide to take a drive out to the property and pay Randy a personal visit. There must be good reason why Randy is late, right? As you near the property, your sunny disposition begins to sour. You can tell from ½ block away the house is empty. The front lawn looks like it hasn t been watered in weeks. Randy s 12-foot motorboat, usually out at the lake all year, is sitting up on blocks in the driveway. It looks like it hasn t been touched all season. 6-7 newspapers are piled on the front step. A utility shut-off notice is hanging from the front doorknob. Residential & Commercial All Rights Reserved. Page 13 of 16

14 You walk around to the side of the house, and see the electricity has been turned off. You think to yourself, This is not going to be fun Sizing up the exterior condition of the home, you conclude Randy has most likely vacated the property. A half an hour later, your assistant arrives with the keys, and you check the interior of the home. Although it s clear Randy has moved out, the house is far from empty. There are bags of what appears to be trash in nearly every room. The refrigerator is full of food. (Remember the power being off?) Although the pump s not running, Randy s aquarium is still full, and you see a dozen or so hungry fishes swimming around. There are 3 boxes of what appear to be old files, and a broken dresser in the garage. Step by step, item by item, what will you do with the property left behind? Any notices to Randy? What happens to Randy s deposit? At what point do you tell the owner? Residential & Commercial All Rights Reserved. Page 14 of 16

15 SAMPLE LEASE CLAUSES RESIDENTIAL/COMMERCIAL Important note: These clauses are presented for informational purposes only, and may not be enforceable. Please consult your broker and/or legal counsel before adopting any new lease language! Abandoned Property. All personal property of Tenant remaining in the Premises after the expiration of the Lease Term or after the abandonment of the Premises by Tenant may be treated by Landlord as having been abandoned by Tenant, and Landlord shall have the right to remove such personal property from the Premises without any obligation to deliver such personal property to Tenant and without any liability to Tenant whatsoever, it being agreed that Tenant shall have no right to reclaim such property. Landlord shall have no duty to notify Tenant that Landlord may dispose of Tenant's property. Tenant shall be presumed conclusively to have abandoned the Premises if the amount of Tenant's property removed or being removed by Tenant from the Premises is substantial enough to indicate a probable intent to abandon the Premises, and such removal is not within the normal course of Tenant's business, or if Tenant removes or is removing any material amount of Tenant's personal property from the Premises at a time when Tenant is in default in the payment of rent due hereunder and such removal is not within the normal course of Tenant's business. Nothing contained in this paragraph shall prejudice or impair Landlord's rights as a lienholder and secured party under this lease, and the rights granted to Landlord under this paragraph shall be cumulative of its rights as a lienholder and secured party. Abandoned Property. If Tenant shall fail to perform any repairs or restoration, or fail to remove any items from the Premises as required hereunder, Landlord may do so at Tenant's expense, and Tenant shall pay Landlord's charges therefor upon demand. All property removed from the Premises by Landlord hereunder may be handled, discarded or stored by Landlord at Tenant's expense, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. All such property shall at Landlord's option be conclusively deemed to have been conveyed by Tenant to Landlord as if by bill of sale without payment by Landlord. If Landlord arranges for storage of any such property, Landlord shall have a lien against such property for costs incurred in removing and storing the same. Residential & Commercial All Rights Reserved. Page 15 of 16

16 ADDITIONAL NOTES: Residential & Commercial All Rights Reserved. Page 16 of 16