Resources

“The Short End: Abandoning the Leasehold,” Alex N. Semanko, Moffatt Thomas

By Alex N. Semanko

Published by the Idaho Business Review’s Square Feet Magazine, April 2017

Alex N SemankoIt is a fear for many landlords when they decide to go into the rental property business: what happens if someone rents your property and then decides they want to break their lease early? This is where things can get tricky.  Before you do anything at all, you need to know your rights as they pertain to the law.

Usually, the residential rental agreement or lease will contain provisions that set out how a landlord will proceed in a situation like this. When a tenant wrongfully abandons the leased premises, the landlord has several options.

For one, the landlord can treat the tenant’s abandonment as an offer of surrender and accept that surrender. By this election, the landlord agrees to a termination of the lease and relieves the tenant from any further liability.  A landlord might elect this option if the present fair rental value of the premises is higher than the rent payable by the tenant.  This will permit the landlord to relet the premises to another at a higher rental amount.

Second, the landlord may notify the tenant that the landlord does not accept a surrender of the leasehold but that the landlord will relet on behalf of the tenant for the purpose of mitigating tenant’s damages. When the landlord pursues this course of action, the tenant is held liable for the difference between the promised rent stipulated in the lease agreement and the amount recoverable from a reletting.  The tenant is also liable for any special damages.  The majority of jurisdictions (including the State of Idaho) permit the landlord to mitigate damages but do not require the landlord to do so.  Under this procedure, a final accounting and settlement of claims between the landlord and tenant must await the end of the lease term.  The landlord who takes this option runs the risk that the act of reletting the premises may be considered an acceptance of the surrender and termination of the lease.  In order to avoid that possibility, there will often be an exchange of correspondence between the landlord and tenant in which the landlord states that the landlord is reletting for the account of the defaulting tenant and not for the landlord’s own account.

Third, the landlord may do nothing and sue the tenant as each installment of the rent matures, or sue for the whole when it becomes due. Under this course of action, the leasehold estate and the concomitant obligations continue unaffected by the tenant’s abandonment.  However, if a landlord chooses to exercise this option, the landlord may face certain risks.  One, the vacant premises can be subject to vandalism and higher insurance premiums.  Two, by waiting to sue for past due rents, the landlord runs the risk that at the time the suit is commenced the tenant may not be able to be found, is no longer subject to the court’s jurisdiction, or is judgment proof.  In any event, courts and legislatures in several jurisdictions have obliged landlords to make a reasonable effort to relet the premises in order to mitigate damages caused by the defaulting tenant.

Lastly, the landlord may regard the tenant’s breach as an anticipatory breach of contract, resume possession of the premises, and sue immediately for full damages – present and future. This remedy recognizes that the lease is a contract as well as a conveyance, and the right to recover damages is unaffected by the existence or nonexistence of the leasehold estate.  The measure of damages is the difference, reduced to present worth, between the fixed rent stated in the lease and the present fair market value of the premises for the remainder of the term, together with such special damages as may have resulted from the breach.  Under this course of action, the residence is surrendered and the landlord recovers damages, not the rent.[1]  This is a desirable action where the present value of the unpaid rent is higher than the property’s fair market value.

Knowing your rights as a landlord is critical in today’s market. It is equally important for tenants to understand their states’ landlord/tenant laws and the impacts that accompany certain actions under their lease agreement.

[1] See Kanter v. Safran, 68 So. 2d 553 (Fla. 1953).


Alex N. Semanko is an attorney in the Boise office of Idaho law firm, Moffatt Thomas, with a focus on the environment and natural resources and real estate law. Prior to joining Moffatt Thomas, Ms. Semanko worked as a Clerk in Washington D.C. for the House Natural Resources Committee, Subcommittee on Water, Power and Oceans. More information is available online at www.moffatt.com.

Download the article here: The Short End: Abandoning the Leasehold, Alex N Semanko