Does landlord have a duty to mitigate damages if tenant breaches lease?

If you are a landlord in New York, you may – or may not – be responsible for mitigating damages that result from a breach of the lease.

Generally, a non-breaching party to a contract has a duty to mitigate damages resulting from another party’s breach of contract. For example, imagine that a construction company enters into a contract to buy building materials from a manufacturer. If the manufacturer breaches the contract by failing to provide the building materials, the construction company will not be able to complete the building, and may not be paid for the project. Under traditional contract rules, the construction company has a duty to attempt to acquire the materials from another manufacturer. The construction company may not sue the manufacturer for all of the money it lost as a consequence of failing to complete the project unless it at least made an effort to replace the materials, by, for example, buying the materials from another manufacturer. Even if successful in replacing the materials, the construction company may sue the manufacturer for any additional costs it took on in search of those replacement materials.

Landlord tenant law sometimes imposes a similar duty upon a landlord in the event that a tenant breaches a lease by, for instance, moving out before the end of the lease term. Many jurisdictions would require a landlord in this position to at least attempt to rent the property to another tenant. If successful, the landlord will have avoided some of the financial losses that would have occurred had the property remained vacant until the end of the lease term. However, in other jurisdictions, no such duty is imposed upon landlords. In those cases, if a tenant breaches a lease by moving out, a landlord may wait until the end of the lease term, and then sue the tenant for the entire amount of rent still outstanding under the lease, without making any attempt to find a replacement tenant.

What kind of jurisdiction is New York? Surprisingly, it is both. Although most courts agree that commercial landlords have no duty to mitigate their damages (that is, they have no duty to find replacement tenants), there is much disagreement – and confusion – between the courts about whether residential landlords have such a duty. For the foreseeable future – that is, until a higher court takes an unambiguous position on this issue – case law in the different counties determines whether the duty applies to any given landlord.

If you are a landlord or tenant, and have any questions about how the law applies to your property or lease, please feel free to call (516) 858-2620 to speak with a Landlord Tenant Attorney.

 

*Contributions to the research and preparation for this blog were made by Jason Mays, J.D.(awaiting admission in NYS)

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