A Landlord's Duty To Mitigate Damages For Breached Leases
Landlords, whether they deal with residential tenants or commercial tenants, are always faced with the possibility of tenants choosing to vacate the property before the expiration of their lease terms. In several states many, many years ago, contract law principles (such as mitigation) were not often applied to commercial lease agreements, which meant that when tenants broke their leases, the landlords were not required to locate other tenants to take over the premises for the remaining portion of the lease. Instead, they could wait until the lease expired and sue the breaching tenant to recover any amount of unpaid rent remaining. However, the laws have since changed, slowly but surely, to include a mitigation requirement with respect to commercial leases. Still, even though most states recognize a landlord's duty to mitigate, the duty is not a practice that is systematically accepted. That said, it is crucial for landlords to understand the laws regarding mitigation and how they apply to them.
What is Expected of New Jersey Landlords?
Under New Jersey law, all landlords must mitigate the damages that might result from a tenant breaking the lease. As early as the late '70s, the New Jersey Supreme Court in Sommer v. Kreidel noted that landlords of residential properties had to mitigate by trying to find a new tenant if the prior tenant left before the end of the lease. In the early '90s, the court in McGuire v. Jersey City stated that the rule also extends to commercial lease situations.
Given New Jersey's laws, landlords who deal with commercial properties may want to consider protecting themselves by negotiating very specific terms within the lease that cover their duty to mitigate. Such clauses within a lease might limit certain obligations with regard to certain aspects of the lease, to include making the tenant relinquish possession of the premises prior to mitigation, which will allow the landlord to maintain discretion when it comes to the kind and/or quality of new tenant that is sought and minimize the landlord's monetary obligations with respect to repurposing the space for the new tenant chosen.
What is important for commercial landlords to keep in mind is that the drafting and creation of the lease agreement will be crucial, particularly when it comes to covering mitigation duties. As of yet, the courts have not explicitly ruled whether or not such an obligation can be completely negotiated away, but there are ways in which a lease agreement can protect the landlord. Leases often include a number of essential elements, and the purpose of many of those key elements is to protect the landlord just in case the lease relationship does not work out as anticipated. Adding clauses that will limit a landlord's duty to mitigate might ultimately save a landlord a great deal of money and litigation costs.
If you are a commercial landlord and you have questions or concerns about your duty to mitigate when tenants leave your property prior to their leases' end, contact one of the skilled New Jersey attorneys at Griffin Alexander, PC as soon as possible to learn more about your rights and obligations under the law.