- Commercial Landlords Now Have A Duty To Mitigate Damages
- August 14, 2003 | Author: Grant M. Yoakum
- Law Firm: Buckingham, Doolittle & Burroughs, LLP - Cleveland Office
In a long-awaited decision, the Ohio Supreme Court recently found that, unless the lease states otherwise, commercial landlords in Ohio are required to use reasonable efforts to mitigate or limit their damages (i.e., find a new tenant) when a tenant abandons the leased property. This decision resolves a split of authority among Ohio's Appellate Courts and follows the modern trend to require landlord mitigation.
In reaching this decision, the Court found that for purposes of damages, leases of real property should be interpreted consistent with contract principles as opposed to real property principles. Accordingly, the Court extended the duty to mitigate that is implied in most contract damage disputes to claims for damages from the abandonment of leased property.
The specific holding of the case is not all bad for commercial landlords, however. As noted above, the duty to mitigate is only present "barring contrary contract provisions." As a result, if the lease specifically states that the landlord has no duty to mitigate, this provision would be enforced. The Court also emphasized that the holding does not require a landlord to accept any replacement tenant and that the landlord may consider factors such as tenant mix in deciding which new tenants are acceptable. Additionally, consistent with analyzing damages under contract principles, the court noted that the landlord's recoverable damages include "all damages provable" by the landlord. This statement apparently opens the door for a landlord to recover damages beyond the rent payable under the remaining term of the lease, including the landlord's decreased profitability caused by the abandonment.
From a lease-preparation and negotiation standpoint, this decision means that a commercial tenant should confirm that its lease expressly obligates or is at least silent on the landlord's duty to mitigate. In contrast, landlords must now expressly eliminate any duty to mitigate if they wish to avoid this obligation.
1 Frenchtown Square Partnership v. Lemstone, Inc. (July 23, 2003), 2003 Ohio 3648 2003 Lexis 1977