Is a Commerical Landlord Responsible?

David Allen

Partner

Jaburg | Wilk Attorneys at Law

Does a commercial landlord who legally evicts its retail store tenant become liable for any loss or damage to the tenant’s inventory left behind following the eviction? This was the issue posed to the Arizona appellate court in the recent case of Kim v. Wong. In that case, the landlord Wong legally evicted his tenant Kim when Kim failed to vacate his leased premises, in which he operated a jewelry store, following the termination of his lease. At the time that Kim was removed from possession of the premises, he left behind certain inventory. Soon thereafter, somebody broke into the premises and stole a portion of such inventory.

Kim thereafter sued Wong, claiming that Wong was liable for his losses based upon a claim of “breach of bailment.” As stated by the Court, “A bailment arises where personal property is delivered to one party by another in trust for a specific purpose, with the express or implied agreement that the property will be returned or accounted for when the purpose is accomplished.” If a bailment exists, the party in possession of the subject property – which here would be the landlord – is deemed to be a ”bailee.” As such, a bailee can be found to be liable for losses that arise from the failure of the bailee to “exercise reasonable care” to prevent such losses.

The issue then that arises is whether a landlord such as Wong is considered to be a “bailee” under the circumstances described above. The Court concluded that Wong was not a bailee, in that Wong did not ever exercise any affirmative control over the inventory, such as by removing it to a different location. Citing out-of-state case law, the Court noted that “When a tenancy has been terminated by lawful eviction, the landlord has no duty to care for property that the former tenant has left behind.”

If a landlord chooses to actually take control of the tenant’s property, such as by moving it to a different location, including a storage facility, then the landlord will likely be deemed to be a “bailee.” A landlord who precludes their tenant from having access to its property can also be deemed to be a “bailee.” This was the situation in another out-of-state case, where a landlord was held to be a “bailee” after it closed an entire building with the tenant’s property still inside. In any case where a landlord is found to be a “bailee,” it will be held liable for any losses to the tenant’s property if it is determined that the landlord failed to act reasonably to avoid such losses. The question of what constitutes “reasonable” care is far from black-and-white, and thus to avoid having to litigate that issue, a landlord is well-advised to avoid acting in such a manner so as to be deemed to be a “bailee.”