What happens when a tenant quits paying rent and abandons the premises? Can the landlord sit back and collect full rent for the remainder of the lease term, or does he have to try to lease the premises to someone else?
The answer is, “it depends.”
It depends on two things. First, it depends on what the lease says. Second, it depends on where the property is located.
If the lease itself provides that the landlord has a duty to mitigate his damages, then he must make reasonable efforts to find a replacement tenant. He cannot sit idle and demand payment of the rent each month for the rest of the term without making reasonable efforts to find a new tenant. If he is successful in re-leasing the property, the former tenant is entitled to a credit for the amount of rent the new tenant pays.
What if the lease contains no provision requiring mitigation (and most do not)? Can the landlord insist on the payment of full rent for the rest of the term without making any effort to find a new tenant?
In many states, the law provides that the landlord has to make reasonable efforts to lease the property to someone else in order to minimize the tenant's damages, regardless of what the lease says. In these states, the landlord is entitled to recover only the deficiency in rent after deducting the rent he receives from the new tenant, assuming he was reasonably diligent in trying to re-lease the property. However, if the landlord fails to make reasonable efforts to re-lease the property and the tenant is able to show that the property could have been re-leased, the tenant is responsible only for the difference between the rent under the lease and the rent the landlord could have obtained if he had leased the property.
What about other states? Interestingly, there are a number of states where the landlord has no duty to mitigate his damages. He can choose to hold the property vacant and collect the full amount of rent from the tenant each month as it comes due, or he may sue for the full present value of the rent (subject to the duty to refund a portion of it if he later re-rents the premises even though he has no duty to do so). This somewhat harsh rule is often justified on the theory that the tenant should have no right to impose a duty to find a new tenant on the landlord as a result of the tenant's wrongful behavior.
States that appear to follow this rule include: Alabama, Arkansas, California, Delaware, District of Columbia, Florida, Georgia, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, Oklahoma, Oregon, Pennsylvania, Texas, Virginia, and Washington.
In a number of states, the law is not clear, or there are cases that appear to have decided the issue both ways, including Ohio, New York, Illinois, and New Jersey. In some states, the courts hold that there is no duty to mitigate unless the landlord re-enters the property and takes possession.
If your business requires you to enter into leases in other states, do not assume that the law of every state is the same. If possible, determine what the local law is so that you can be fully aware of your legal responsibilities under the lease. In addition, it is always a good idea to study the remedies provision of your lease carefully, and to try to negotiate a provision specifically stating that the landlord has a duty to mitigate his damages if the lease is breached, or capping the damages at a fixed amount.