Get Control over Abandoned Fixtures, Furniture, and Equipment

If a tenant moves out and leaves behind fixtures, furniture, and equipment, you may decide to leave them in the space because they make it more attractive to prospective tenants. But that can lead to trouble once a new tenant moves in. The new tenant may think that it owns the abandoned fixtures, furniture, and equipment and might try to remove or sell them. And if your lease is like many we've seen, it may not stop that tenant from doing this.

To plug this lease loophole, make sure the lease spells out who controls abandoned fixtures, furniture, and equipment, says New York City attorney A. Barry Levine. He suggests adding 11 protections to your lease. There's a Model Lease Clause on p. 5 that you can adapt and use that includes those protections.

Lease Doesn't Resolve Abandoned Trade Fixtures Problem

Having those protections in the lease might have helped an Ohio owner. After a tenant abandoned its trade fixtures in the space, the owner relet the space with the fixtures in it. The new tenant agreed to buy the fixtures from the owner, but made only partial payment before auctioning the fixtures off and keeping all the money. The owner and tenant wound up in court in a dispute over who owned the fixtures.

An Ohio appeals court ruled that the lease was ambiguous about who owned the fixtures and a lower court would have to decide that issue. The court noted that the lease said, “All trade fixtures, furniture, furnishings, and signs installed in the Premises by Tenant and paid for by Tenant shall remain the property of Tenant and may be removed upon the expiration of the term of this Lease” (emphasis added). But it was unclear if the tenant met those requirements because it didn't install the trade fixtures (the previous tenant did) and it hadn't finished paying for the trade fixtures [Forest Park Partners, Ltd. v. Dave's Market, Inc.]. Even if the owner eventually wins this lawsuit, it will have spent time and money resolving it.

Add 11 Protections to Lease

To avoid disputes with a tenant over the ownership and use of abandoned fixtures, furniture, and equipment in its space, add the following 11 protections to your lease, says Levine:

Identify fixtures, furniture, and equipment in space. Require the tenant to acknowledge that the abandoned fixtures, furniture, and equipment are in the space, says Levine. And attach an exhibit to the lease that describes those items in detail, he adds [Clause, par. a(i)]. This prevents the tenant from claiming that it installed them.

Say tenant accepts them “as is.” Require the tenant to accept the abandoned fixtures, furniture, and equipment “as is,” says Levine [Clause, par. a(iii)]. This way, you're not required to put them in a better condition, he explains.

Don't warranty title. Don't make any representations or warranties about the ownership or condition of the abandoned fixtures, furniture, and equipment, says Levine [Clause, par. a(ii)]. You want to avoid any conflicts if the previous tenant returns to claim ownership of them, he warns. And you won't be responsible for repairing the abandoned fixtures, furniture, and equipment if their condition deteriorates, he adds.

Say you can stop tenant's use. To keep control of the fixtures, furniture, and equipment, have the tenant agree that it can use them only until you tell it to stop, says Levine [Clause, par. a(iv)]. This puts the tenant on notice that you have ultimate control over them, he says. You can pull the plug on the tenant's use of them at any time.

Bar sale or transfer. Bar the tenant from selling or transferring the abandoned fixtures, furniture, and equipment you've listed, says Levine [Clause, par. a(v)].

Get removal right. Get the right to remove the abandoned fixtures, furniture, and equipment from the space whenever you want to, says Levine [Clause, par. a(vi)]. Otherwise, the tenant may try to stop you from doing so until it moves out, he says.

Practical Pointer: The tenant may demand that you give it advance notice if you want to remove the abandoned fixtures, furniture, and equipment during the lease, says Levine. This is fair. How much notice should you give? He suggests five business days [Clause, par. a(vi)].

Bar rent abatement. Say that the tenant isn't entitled to any rent abatement if you remove the abandoned fixtures, furniture, and equipment or stop the tenant from using them, says Levine [Clause, par. a(vii)]. The rent shouldn't be tied to the tenant's use of these fixtures, furniture, or equipment, he explains.

Make tenant responsible for any repairs. Make the tenant responsible for the repair and maintenance of the fixtures, furniture, and equipment during the lease—including all repair and maintenance costs, says Levine [Clause, par. b]. After all, since the tenant is benefiting from using the abandoned fixtures, furniture, and equipment, it should be responsible for their upkeep, he says.

Require your approval of replacements and improvements. A tenant may want to improve the fixtures, furniture, and equipment—say, by adding upgrades or replacing certain parts. Require the tenant to get your prior, written approval before doing so, says Levine [Clause, par. c]. Otherwise, you might end up with fixtures, furniture, and equipment that are less attractive to prospective tenants.

Require return in good order. Require the tenant to return the abandoned fixtures, furniture, and equipment, with their replacements and improvements, to you in good order when its lease ends, says Levine [Clause, par. d]. This will prevent the tenant from walking off with those items or returning them in a dilapidated state, he says.

Make tenant responsible for damage. Make the tenant solely responsible for any damage done to the abandoned fixtures, furniture, and equipment, says Levine [Clause, par. e]. This way, you have no obligation to pay any of costs of fixing the damage, he explains.

CLLI Source

A. Barry Levine, Esq.: 320 E. 23rd St., New York, NY 10010; (212) 477-5118; blevine2@nyc.rr.com.