Owner Adequately Mitigated Damages

Facts: A shopping center owner sought to recover damages from a liquor store tenant after it breached its lease and lease guarantees by failing to pay rent. After the owner sent the tenant a notice to quit possession of the premises, the tenant moved out. The owner sued the tenant. The tenant argued that it shouldn’t have to pay monthly rent until the space is occupied by a new tenant. The tenant claimed that the owner hadn’t mitigated its damages by finding a new tenant. A trial court ruled in favor of the owner. The tenant appealed.

Decision: A Connecticut appeals court upheld the trial court’s decision.

Reasoning: The appeals court noted that Connecticut law is clear that in an action for unpaid rent, a commercial property owner is generally under no obligation to mitigate its damages after the tenant fails to pay rent. “Such an obligation arises only if the lessor manifests an intent to terminate the tenancy either by taking an unequivocal act showing this intent or by bringing an action for damages based on the tenant’s breach of contract,” said the appeals court. However, the duty to mitigate damages does not require the owner to “sacrifice any substantial right of its own or to exalt the interests of the tenant above its own,” it specified. Rather, the owner is required to make “reasonable efforts” to minimize damages.

The appeals court determined that the owner had made a reasonable effort under the circumstances. The owner hadn’t failed to mitigate damages prior to the termination of the lease, because it attempted to negotiate with a substitute tenant, but that tenant wouldn’t agree to an assignment of the existing lease and wouldn’t personally guarantee the lease. The owner didn’t fail to mitigate damages following the termination of the lease, because it took steps to lease the premises to another tenant following the termination of the lease—but for reasons that were not its fault, the deal fell through.

• Southhaven Associates, LLC v. McMerlin, LLC, August 2015