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A Landlord's Duty to Mitigate. Part III
June 4, 2012
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This series focuses on a commercial landlord's duty to mitigate their damges after a default by a tenant.  Earlier we discussed the District of Columbia's treatment of the duty to mitigate.  A discussion with respect to the law of Virginia is below, with Maryland to follow shortly. 

Virginia

 

A commercial landlord generally has no duty to mitigate under the law of the Commonwealth of Virginia. However, certain older Virginia cases have held that a landlord has a duty to mitigate damages by accepting or procuring a new tenant in the rare situation where a lessee fails to ever occupy or take possession of the leased premises. These cases have not imposed a duty to mitigate upon the abandonment of premises after a tenant has taken possession. In James v. Kibler's Admr., 94 Va. 165 (1896), the tenant failed to take possession and occupy under the terms of the lease.   The court held that the landlord's measure of damages was the difference between what he had received under the violated lease, and what he would have received from the purchaser of the lease at either a private or public sale. The court also remarked that the landlord had a duty to minimize the amount of its damages.

 

The court in Crowder v. Virginia Bank of Commerce, 127 Va. 299 (1920), however, declined to extend the rule from James v. Kibler's Admr, to cover a tenant who had abandoned leased property after having taken possession. The court distinguished James from Crowder on the grounds that it dealt with a refusal to take possession, rather than an abandonment. The court held that upon a tenant's abandonment before the expiration of the term, a landlord will not be required to re-let the premises for the benefit of the tenant, but may, at its election, allow the premises to remain vacant and recover the rent from the tenant for the remainder of the term.

 

A more recent case, TenBraak v. Waffle Shops, Inc., 542 F2d 919 (4th Cir. 1976) affirmed the older cases listed above. The court noted that the "remedies of a landlord in an action against his tenant are generally recognized, in the absence of express statutory or judicial modification, to be the same as the remedies permitted at common law." The opinion goes on to hold that the law of Virginia allows the lessor certain options when a tenant abandons the premises, the landlord can "re-enter and terminate the lease, it may reenter for the limited purpose of re-letting the premises without terminating the lease, or it may refuse to re-enter and institute an action for accrued rents."

A widely discussed 2007 U.S. District Court case, Laskin Road Associates, L.P. vs. Capitol Industries, Inc. (2007 U.S. Dist. Lexis 41276) applied the rule from Crowder to find that a commercial landlord had no duty to mitigate damages where a defaulting tenant remained on the premises. The court reasoned that if a commercial landlord had no duty to mitigate with respect to a wrongful abandonment, then clearly there is no duty to mitigate when a defaulting tenant was still in possession of the premises.

 

Note however, that Virginia has imposed a duty to mitigate damages by statute for residential leases.

  • Shareholder

    John Kelly is a shareholder of Bean, Kinney & Korman and focuses his practice on general corporate law and real property law, including commercial real estate leasing, financing and acquisitions, and business mergers and ...