What Is Consignment?
In commercial real estate and business law, consignment is a highly specific method of selling inventory. In a traditional retail model, a store buys 100 couches from a manufacturer, puts them in a warehouse, and tries to sell them for a profit. The store owns the couches.
In a consignment model, the store (the consignee) does not buy the couches. The manufacturer (the consignor) simply drops the couches off at the store. The store puts them on display and attempts to sell them. The manufacturer retains 100% legal ownership of the couches the entire time they are sitting on the showroom floor. When a customer finally buys a couch, the store takes a percentage of the sale as a commission and sends the rest of the money to the manufacturer.
The Massive Risk: Landlord's Liens and Bankruptcy
Consignment creates incredibly dangerous situations in commercial real estate due to the Landlord's Lien (Florida Statute 83.08).
Imagine an art gallery leases a storefront. An artist consigns a $50,000 painting to the gallery. A month later, the gallery goes bankrupt and stops paying rent. Under Florida law, the commercial landlord has the right to lock the doors and seize all the property inside the gallery to pay for the unpaid rent.
If the landlord seizes the $50,000 painting, the artist will scream, "You can't take that! It's on consignment, I still own it!" Unfortunately for the artist, unless they strictly followed the Uniform Commercial Code (UCC) by filing a massive amount of legal paperwork (a UCC-1 financing statement) to put the world on public notice that the painting was consigned, the landlord (or a bankruptcy court) is legally allowed to seize the painting and auction it off, leaving the artist with nothing.
Related Terms
- Landlord's Lien — The statutory right that allows a landlord to seize consigned goods
- Commercial Lease — The contract between the landlord and the bankrupt consignee
- Eviction — The legal action that often triggers the seizure of the store's inventory
Barnes Walker Commercial Law
Barnes Walker's commercial attorneys assist Florida retailers and suppliers in drafting strict consignment agreements and filing ironclad UCC-1 financing statements, ensuring our clients' valuable inventory is strictly protected from aggressive commercial landlord liens and bankruptcy seizures. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC