Personal Liability for Removal of Goods and CTA

It is fairly common for a commercial tenant to break its lease and move out prior to the lease expiring.  This usually occurs because the tenant's business is suffering, and they can't afford to stay. Not surprisingly, landlords don't like tenants that break a lease, and often the tenant vacates the premises without notice.

Often, the tenant is a corporation, and the tenant is not worried about being sued, because the corporation has ceased to operate.  The landlord is frustrated, because the tenant has taken away all the goods and equipment, which the landlord may have been able to seize to sell for rent arrears.

It isn't so easy for the tenant.  The gives a powerful remedy to landlords whose tenants have secretly vacated and removed their property.  Provided certain conditions are met, the Act allows landlords to sue the tenant for double the value of the property removed.  And it doesn't end there.  Any person that helps remove or later conceal the property is equally liable.  In other words, all the people that helped move the goods and those who are storing them are potentially liable for double their value.

The power of this provision is frightening.  In one case, the rent arrears were approximately $235,000, and the tenant company vacated, removing $500,000 in goods.  The landlord got judgment against the owners of the company for $1,000,000, PLUS the rent arrears.  Because the act of removing the property to avoid rent is fraudulent, the losers also had to pay the landlord's entire legal bill.

The threat of a huge lawsuit can work wonders.  It is unlikely that one person removed the goods, and the tenant gets awfully embarrassed when the friends that helped him move out (probably volunteering their time) get smacked with a huge lawsuit.  The tenant who thinks that they are smart and that their house and personal assets are safe, because the lease is in the name of the company, becomes much more cooperative when he realises that his assets are at risk.

The bottom line: if you are a tenant, you are better off negotiating a lease-break penalty than risking a lawsuit that could ruin you and others.  If you are a landlord, try to find out who helped your tenant move out and use that knowledge strategically to obtain a reasonable settlement with the former tenant.