When a person or entity leases movable property to another, the legal relationship is governed by the Louisiana Lease of Movables Act (“LMA”). The LMA is Louisiana’s version of UCC Article 2A, and exclusively governs all commercial leases of movables when the property is located in Louisiana.
“Movables” are essentially the same thing as what common law refers to as “chattel” or personal property, and must be differentiated from “immovable” property, commonly known as real estate. Leases of immovable property are governed by different laws and are beyond the scope of this post.
Under the LMA, a lessor whose lessee has defaulted on payment has two alternative remedies:
- Recover accelerated rent payments for the full term of the lease, plus any liquidated damages and additional recoverable charges; OR
- Terminate the lease, recover possession of the leased property, and recover amounts then owed under the lease plus any contractual liquidated damages.
The law is very clear that these remedies are alternative, not cumulative. In other words, a lessor can either retake possession of the property, or seek accelerated rent payments, but not both. If the lessor seeks to recover accelerated rent for the full term of the lease, then they have to let the lessee keep the property (essentially turning the transaction into a judicially-forced sale).
Lease of Movables Act – Procedure
The substance of this post will discuss the procedure and rights under the second option, when the lessor elects to recover possession of the leased property. Other options for recovery will also be discussed.
The first requirement is to send written notice cancelling the lease. Certified mail to the lessee’s last known address or the address on the lease is sufficient. If there is a third party possessor, then notice should be sent to that person or entity as well.
Once written notice is sent, the lessee has 5 days from the date of mailing to surrender possession of the leased property. This requirement is powerful and extremely fast.
If the property is not turned over within five days of the notice of lease cancellation, then the lessor can file a summary proceeding for the lessee to show cause why the Court should not order seizure of the leased property. The rule must be heard within 5 days. Thus, depending on weekends and the Court’s schedule, a lessor can obtain a court order for possession in as little as ten days, an extremely quick turnaround in our modern judicial system.
When using this procedure, the lessor must submit an affidavit: 1) verifying that he owns the leased property, 2) authenticating the lease, and 3) verifying that lease payments weren’t made and the lessee is in default. The lessor also must submit evidence of ownership of the leased movable[s].
If the lessor can prove its prima facie case to recover the property, the LMA mandates that the Judge issue a judgment immediately ordering the lessee to surrender possession. Once that occurs, the lessee has 24 hours to comply with the Judgment and surrender the property. Otherwise, the Court shall issue a writ of possession to the sheriff to immediately seize the property and deliver it to the lessor.
Aside from the quick turnaround, there are other benefits to using this procedure to recover leased movables.
First, security is not required. Typically, the seizure of property requires some element of security, such as a bond. However, using the procedure discussed above does not require security to be posted.
Also, at the end of this process, the lessor has obtained a Writ which not only orders the property seized, but also orders it returned to the lessor’s possession. This is differentiated from a Writ of Sequestration (discussed below), in which the lessor can obtain a Writ of Seizure, but then must allow the sheriff to hold the property until further court proceedings are completed.
Further, when the lessor obtains the Judgment ordering the lessee to surrender possession, the lessee only has 24 hours to file a suspensive appeal, and must file sufficient security before it is granted a suspensive appeal. This is an extremely short appeal delay, and forces the lessee to relinquish the property almost immediately, or else post enough money to protect the lessor’s interest in the property.
Finally, the law is clear that this seizure procedure can be done regardless of whether there is a suit pending against the lessee. The existence of a pending suit against the lessee does not restrict the lessor’s ability to seek a judgment ordering the lessee to give back leased property after a default.
Other Methods Of Recovery
Using the LMA to retake possession of the property is different than using the power of sequestration to have the sheriff seize the property and hold it until after the suit has concluded. These methods share some similarities, but have different outcomes and procedural mechanisms.
If a lessor elects to use the writ of sequestration, then the lessor has to win the underlying suit before being awarded the property. The Writ of Sequestration only allows the sheriff to seize the property; it does not award possession of the property to the lessor.
In addition, the LMA only allows the sequestration procedure to be used in conjunction with an ordinary proceeding. This has its own set of problems, especially in time-sensitive cases, because it means having to wait for an entire ordinary proceeding to play out in state court, which could mean endless delays, continuances, lengthy discovery, and depositions, among other things.
Further, if the sequestration procedure is used in conjunction with an ordinary proceeding, the lessor must post security of 125% of the value of the property before the seizure can occur.
In situations where the LMA’s provisions apply, I only recommend using the sequestration procedure if I have reason to believe that the property will be moved, damaged or destroyed in a matter of days, and my client cannot wait approximately ten days for seizure.
The final option is to use a rare exception to Louisiana’s “no self help” rule. The LMA authorizes a form of self-help in very limited circumstances. If the lessor submits a verified affidavit to the Judge that the lessee is not properly maintaining the property and it is in “jeopardy of loss, damage, destruction, or seizure,” the Judge can authorize self-help to retake possession.
However, there are several reasons why this is not the best option for most instances. First, just as with sequestration, the lessor is required to post a bond.
Second, the self-help must be done in such a way that “possession is obtained in a peaceable manner and without breach of the peace.” That is vague language, and a current possessor could simply refuse to turn over the property, and then it would be difficult to retake possession without breaching the peace.
This method is also similar to the Writ of Sequestration, because as soon as the property is seized through self-help, it must be turned over to the sheriff. The lessor then has to file a summary proceeding, seek a judgment of possession, and wait the 5 days for a hearing and 24 hours for the lessee to comply with the judgment before the property will be turned back over to the lessor.
When you or your company have leased property in Louisiana and the lessee has defaulted, it is important to be familiar with the Louisiana Lease of Movables Act and its functions. The attorneys at Smiley Law are experienced in this area of the law and are ready to help you retake possession of property that is rightfully yours.