Owner Could Mitigate Damages by Selling Building

A tenant that had leased an entire office building moved out and stopped paying rent two years before its lease ran out. The owner listed the building for lease or sale. No one wanted to lease the building, so the owner sold it, incurring approximately $140,000 in sale-related expenses. The owner then sued the tenant for violating its lease and asked the court to order the tenant to pay its sale-related expenses. The tenant argued that the owner's sale of the building violated its duty to mitigate its damages.

A California appeals court ruled that the owner could mitigate its damages by selling the building. The court noted that nothing in the law or in the lease required the owner to mitigate its damages in any particular way. The only requirement was that the sale of the building had to be a reasonable way to mitigate its damages, it explained. Here, selling the building was reasonable because the entire building was vacant and no one would lease it. So the court ordered the tenant to pay the owner's sale-related expenses [Millikan v. American Spectrum Real Estate Services California, Inc.].