Here’s the scenario: In month 9 of a 12 month residential lease term, Tenant defaults on his rent payment and abandons the apartment with three months still to go on the lease. Landlord, in accordance with the lease terms, declares the lease terminated and brings a civil suit seeking monetary damages against tenant – including the value of the three months’ worth of rent Landlord otherwise would have received had Tenant not abandoned the lease. However, during those three months, Landlord makes absolutely no effort to relet the apartment – in fact, he just shutters it up and lets it sit empty. The question now raised by Landlord’s suit – and a common question in landlord/tenant disputes involving premature lease termination – is whether or not Landlord had a duty to mitigate his damages suffered as a result of Tenant’s default? In particular, can a landlord recover damages for lost rent without making at least some minimally reasonable effort to cover some if not all of its losses by obtaining a new tenant to fill the abandoned space?
Until recently, the answer to this question under New York law was that no duty to mitigate existed, meaning absent lease language to the contrary, the residential landlord generally had no duty to mitigate its damages and could have recovered the full value of remaining payments owed under the lease for the entire lease term even if the landlord made no attempt whatsoever to offset, minimize, or cover its losses.
That all changed in the Summer of 2019 when New York passed the Housing Stability and Tenant Protection Act of 2019, a package of comprehensive landlord-tenant law legislation. Section 227-e of the Act expressly reverses the old “no mitigation” rule and codifies a duty for residential landlords to mitigate their damages in the event of a tenant’s premature departure in violation of the lease (note: the statute expressly states that it applies only to leases “covering premises occupied for dwelling purposes” (emphasis added); commercial leases are not affected by the statute, and New York landlords dealing with premature termination of a commercial lease continue to have no duty to mitigate their damages. See Holy Properties Ltd., L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130, 133 (1995).) .
Landlords must now also be aware of several other aspects of the new rule. First, Section 227-e puts the burden of proof on the landlord to demonstrate they took steps to mitigate their damages – specifically, to find a new tenant to take over the rental during the remaining lease term. Nor can the landlord contract its way out of the mitigation rule – Section 227-e explicitly renders unenforceable any lease term that purports to eliminate a landlord’s duty to mitigate its damages. Finally, the new statute provides that the mitigation steps a landlord takes must be done “in good faith and according to the landlord’s resources and abilities,” and must constitute “reasonable and customary actions to rent the premises at fair market value or at the rate agreed to during the term of the tenancy, whichever is lower.” What those steps are remains to be seen, but in all likelihood, residential landlords must take real actions to try to fill the space, including but not limited to hiring a professional residential real estate broker and taking other steps to affirmatively market and advertise the availability of the space.
