Attention Commercial Landlords: Use Caution in Disposing of Tenant and Third-Party Property After a Commercial Lockout in Arizona

Please note that, while this article accurately describes applicable law on the subject covered at the time of its writing, the law continues to develop with the passage of time. Accordingly, before relying upon this article, care should be taken to verify that the law described herein has not changed.

When a commercial tenant stops paying rent, the landlord often faces a practical problem well before any lawsuit is filed: what to do with the personal property the tenant has left on the premises. Arizona law gives commercial landlords a self-help remedy, a statutory lien that allows the landlord to seize and, eventually, sell the tenant’s property to satisfy unpaid rent, but that remedy comes with strict procedural requirements. And when the tenant is a warehouse or third-party logistics (“3PL”) operator whose customers have inventory stored on site, the landlord faces a second, distinct problem: that customer property is not subject to the landlord’s lien at all, and mishandling it can expose the landlord to substantial liability. This article addresses both issues.

Arizona law gives a commercial landlord a lien on the personal property a tenant places on the leased premises, and the right to seize that property once rent goes unpaid. Two statutes work together to create this remedy. Under A.R.S. § 33-361(D), if a tenant “refuses or fails to pay rent owing and due, the landlord shall have a lien on and may seize as much personal property of the tenant located on the premises and not exempted by law as is necessary to secure payment of the rent.” If the rent remains unpaid sixty days after seizure, the landlord may sell the property under A.R.S. § 33-1023. A.R.S. § 33-362(A) provides the parallel, broader lien: it attaches to “all property of [the] tenant not exempt by law, placed upon or used on the leased premises, until the rent is paid.” Both statutes extend to sublessees and assignees to the same extent as to the original tenant. A.R.S. §§ 33-361(E), 33-362(D).

There is an important timing distinction between when the lien attaches and when the landlord may actually act on it. Arizona courts have held that the § 33-362 lien attaches immediately, at the start of the tenancy or as soon as the tenant’s property is brought onto the premises. Ex-Cell-O Corp. v. Lincor Props. of Arizona, 158 Ariz. 307, 309, 762 P.2d 594, 596 (Ct. App. 1988); PNC Bank, N.A. v. Coury in & for Cnty. of Maricopa, 257 Ariz. 52, 55, 544 P.3d 88, 91 (Ct. App. 2024). But the landlord’s right to actually seize property under § 33-361(D) does not arise until the tenant is in arrears for rent for at least five days. PNC Bank, 257 Ariz. at 57, 544 P.3d at 93.

The lien reaches only tangible personal property physically located on the leased premises; it does not extend to intangible assets such as accounts receivable. PNC Bank, 257 Ariz. at 57, 59, 544 P.3d at 93, 95. Within that limit, however, the landlord may seize all of the tenant’s non-exempt property on site, not merely enough to cover the unpaid rent, with any surplus returned to the tenant. Janes v. Country Escrow Serv., 135 Ariz. 231, 233–34, 660 P.2d 482, 484–85 (Ct. App. 1982). By its own terms, the lien does not reach “property of any other person, although found on the premises,” A.R.S. § 33-362(B), a distinction discussed further below. Arizona law also exempts certain categories of personal, family, or household property from seizure under A.R.S. §§ 33-1125 and 33-1126, though most business equipment and inventory held by a commercial tenant will not qualify for these exemptions. Landlords should nevertheless remain alert to any claim of exemption and set aside property that plausibly qualifies.

A landlord’s statutory lien does not automatically outrank every other interest in the tenant’s property. In Ex-Cell-O, a secured lender had perfected a security interest in equipment before that equipment was ever delivered to the leased premises. When the tenant later defaulted, the Arizona Court of Appeals held that the lender’s earlier-perfected security interest had priority over the landlord’s statutory lien, reasoning that a contrary rule would make equipment financing for commercial tenants impractical. 158 Ariz. at 311–12, 762 P.2d at 598–99. Before selling seized property, a landlord should investigate prior perfected security interests and third-party ownership claims, including through a UCC filing search, and provide notice to any party whose interest is known or reasonably discoverable, because a secured creditor’s rights survive the landlord’s sale and can be asserted directly against the landlord.

Once a landlord has a valid lien and seizure right, Arizona law prescribes a specific, multi-step procedure for disposing of the tenant’s property. Deviating from these steps, set out in A.R.S. §§ 33-361(D) and 33-1023, can expose the landlord to a conversion claim.

• Seizure and inventory. Once rent is at least five days past due, the landlord may seize as much of the tenant’s non-exempt property on the premises as is necessary to secure the unpaid rent. A.R.S. § 33-361(D). While not required by statute, preparing a detailed written inventory, with photographs and video of the property, helps protect the landlord against later claims of conversion or mishandling.
• The sixty-day waiting period. The landlord may not sell any seized property until sixty full days have elapsed from the date of seizure, and only if rent remains unpaid at the end of that period. A.R.S. § 33-361(D). This is a mandatory minimum, not a target date.
• Pre-sale notice to the tenant. After the sixty-day period, once possession of the property has continued for twenty days after the charges accrue, the landlord may notify the tenant to pay. If the tenant’s residence is in the county where the property is located and the tenant does not pay within ten days, the landlord may proceed to sale; if the tenant’s residence is outside the county, this ten-day demand is not required. A.R.S. § 33-1023(A).
• Notice of sale. The landlord must give the tenant at least five days’ written notice of the sale, including its date, time, and location, a description of the property, and the amount owed. If the tenant cannot be found, notice must instead be published twice in a newspaper of general circulation in the county. A.R.S. § 33-1023(B).
• Public auction only. The property must be sold “at public auction.” A.R.S. § 33-1023(A). The statute contains no exception for a private sale, even one the landlord believes would bring a higher price, and it does not permit the landlord to donate the property instead.
• Application of proceeds. Sale proceeds are applied to the unpaid rent and related charges, with any surplus paid to the tenant. A.R.S. § 33-1023(A); Janes, 135 Ariz. at 234, 660 P.2d at 485. If the person entitled to the surplus cannot be found, the balance is paid to the Arizona Department of Revenue, where the tenant has two years to claim it before it escheats to the permanent state school fund. A.R.S. § 33-1023(C).

A landlord considering this remedy should also keep several related points in mind. First, no court order is required. The statutory lien arises by operation of law and exists “independent of any proceeding.” U.S. (Treasury Dep’t, IRS) v. Globe Corp., 113 Ariz. 44, 47, 546 P.2d 11, 14 (1976). The landlord need not obtain a forcible entry and detainer judgment before seizing and, eventually, selling the tenant’s property; the possessory remedy under § 33-361(A) and the lien remedy under § 33-361(D) are separate and may be pursued independently.

Second, the lien applies with equal force to subtenants and even to occupants without a formal sublease, so long as they are liable for rent as a possessor of the premises. State ex rel. Childers v. 2525 E. Arizona Biltmore Circle Corp., 152 Ariz. 295, 299, 731 P.2d 1239, 1243 (Ct. App. 1986).

Third, whether a landlord owes a bailment-like duty of care over seized property is not fully settled under Arizona law. In Kim v. Wong, 253 Ariz. 247, 512 P.3d 689 (Ct. App. 2022), the Court of Appeals found no bailment where the landlord merely executed a lawful lockout without actively removing or taking control of the tenant’s property, and had offered the tenant access to retrieve it. The court’s reasoning suggests, however, that a landlord who actively participates in removing a tenant’s property, or who otherwise assumes possession or control of it, may take on a duty of reasonable care. Out of caution, landlords should document their handling of seized property carefully and think twice before moving it into off-site storage, which can itself create duties that would not otherwise apply.

Fourth, and most importantly, all of this depends on a valid lien actually existing. Where no rent is truly owed, or the lien otherwise fails, the seizure and sale of the tenant’s property is conversion, not a lawful exercise of the lien. In the unpublished decision Bellas Artes De Mexico, Inc. v. Argento LLC, No. 1 CA-CV 16-0090, 2017 WL 6459826 (Ariz. Ct. App. Dec. 19, 2017), a landlord who locked out a tenant and auctioned its inventory, equipment, and fixtures was held liable for $822,516 in conversion damages because the premises had become untenantable due to the landlord’s own contractor, meaning no rent was lawfully owed and no valid lien ever existed. By contrast, where rent is genuinely owed, the lien and seizure are protected even if the lockout itself was otherwise procedurally defective, because the two questions, the propriety of the termination and the right to seize for unpaid rent, are legally independent. Janes, 135 Ariz. at 233, 660 P.2d at 484.

Commercial landlords, especially those leasing warehouse or 3PL space, frequently encounter a second and distinct problem after a lockout: property belonging not to the tenant, but to the tenant’s customers. Arizona law is unambiguous that the landlord’s lien and seizure rights extend only to the tenant’s own property. A.R.S. § 33-362(B) provides that the landlord may seize the tenant’s property for rent, “but the property of any other person, although found on the premises, shall not be liable therefor.”

Neither § 33-361 nor § 33-362 imposes any affirmative duty on the landlord to investigate, identify, or segregate third-party property before exercising its lien rights, and Arizona law contains no specific procedure or timeline that automatically treats third-party property as abandoned in the commercial context. That said, the absence of an affirmative duty does not mean the absence of risk. A landlord who moves, transfers, sells, or refuses to return third-party property faces exposure primarily under two theories.

Conversion. Conversion is “an act of wrongful dominion or control over personal property in denial of or inconsistent with the rights of another.” Case Corp. v. Gehrke, 208 Ariz. 140, 143, 91 P.3d 362, 365 (Ct. App. 2004). Good faith is not a defense: a landlord who seizes or sells third-party property under the mistaken belief that it belongs to the tenant is liable regardless of intent. Focal Point, Inc. v. U-Haul Co. of Arizona, Inc., 155 Ariz. 318, 320, 746 P.2d 488, 490 n.3 (Ct. App. 1986). The stakes can be severe, as illustrated by the $822,516 judgment in Bellas Artes, and compensatory damages can include not only the property’s value but consequential damages such as lost use and lost profits. Collins v. First Fin. Servs., Inc., 168 Ariz. 484, 486, 815 P.2d 411, 413 (Ct. App. 1991). Punitive damages are also possible where the landlord’s conduct is aggravated, wanton, or reckless, for example, where a landlord refuses to release property despite repeated demands. Acheson v. Shafter, 107 Ariz. 576, 578, 490 P.2d 832, 834 (1971). A landlord who promptly releases property once it learns of third-party ownership faces far less exposure than one who continues to withhold it after notice.

Replevin. Third-party owners may also bring a replevin action to recover their property or its value, together with damages for wrongful detention. A.R.S. § 12-1307; Ex-Cell-O, 158 Ariz. at 308, 762 P.2d at 595; United Producers & Consumers Co-op., Inc. v. O’Malley, 103 Ariz. 26, 436 P.2d 575 (1968).

Because Arizona statutes and case law do not prescribe a specific procedure for handling third-party property after a commercial lockout, the following practical steps are designed to minimize a landlord’s exposure consistent with the principles discussed above.

• Leave the property where it sits. A landlord who changes the locks but does not physically move, handle, or otherwise assume control over customer inventory is unlikely to become a bailee of that property or to owe it a duty of care. Physically interfering with the property, by moving it or denying access to it, invites claims for conversion or interference with property rights.
• Take reasonable steps to identify the owners. This can include a written demand to the tenant for customer information and inventory records; examining the property itself, without moving it, for serial numbers, labels, invoices, or other identifying documentation; posting conspicuous notice on the premises with a reasonable claim period (typically 30 to 60 days) and contact information; reviewing the tenant’s business records if accessible; and, if the tenant will not cooperate, considering an action for declaratory or injunctive relief to compel disclosure.
• Investigate claims of ownership before releasing property, confirming with the tenant where feasible. If competing claims arise, or the tenant disputes a third party’s claim, an interpleader action allows a court to resolve the dispute and can free the landlord from further liability. Ariz. R. Civ. P. 22(b).
• Provide reasonable access for retrieval. The landlord has no statutory obligation to facilitate access, but denying it invites litigation. Negotiating access arrangements, directly or through the tenant, reduces exposure.
• Obtain a written acknowledgment and indemnity from each party before releasing property to them, confirming that they are taking possession of their own property, releasing the landlord from related claims, and agreeing to indemnify the landlord against claims by others arising from the release.

Because Arizona law leaves so much of this process to the landlord’s judgment, the best time to address third-party property is before a default occurs, at the lease-drafting stage. Commercial landlords, particularly those leasing warehouse or 3PL-controlled space, should consider requiring the tenant to maintain and promptly turn over records identifying all third-party property on the premises and its owners, and to cooperate in identifying, segregating, and coordinating the return of that property following any default, lockout, or termination. Landlords should also consider broadening their lease indemnification provisions to expressly cover claims asserted by a tenant’s customers or other third parties arising from the landlord’s exercise of its lockout and lien remedies. Provisions along these lines will not eliminate the risks discussed above, but they can materially improve a landlord’s position if a dispute over third-party property later arises.

Arizona’s landlord’s lien is a powerful, self-help remedy that lets a commercial landlord seize and, after sixty days, sell a defaulting tenant’s property without first going to court, but only if the landlord follows the statutory procedure exactly. Third-party property presents a separate and, in some ways, more dangerous problem, because it falls entirely outside the landlord’s lien and any misstep in handling it, however well-intentioned, can result in significant conversion liability. The safest course for a commercial landlord after a lockout is to seize and sell only what the tenant actually owns, follow the statutory timeline to the letter, and leave anything belonging to a third party untouched until ownership is confirmed and the property can be returned.