 Tenant leaves early; whether landlord has a duty to mitigate his losses- new caselaw
There has been a caselaw which weakens tenants' case on the mitigation of loss issue. 1) Reichman (2) Dunn v (1) Beveridge (2) Gauntlett, where it was held that Landlord is under no obligation to mitigate loss when seeking to recover rent due under a lease and tenant had abandoned the premises. (Court of Appeal, 13 December 2006).
The fact that the case was with regards to a business premises is preety irrelevant- it can be translated to private contracts too- sadly
Summary
(1) Reichman (2) Dunn v (1) Beveridge (2) Gauntlett
Landlord under no obligation to mitigate loss when seeking to recover rent due under a lease and tenant had abandoned the premises.
Court of Appeal
13 December 2006
Source: Transcript [2006] EWCA Civ 1659.
Ms Beveridge (B) and Mr Gauntlett (G) were in practice together as solicitors. They leased offices from Mr Reichman (R) and Ms Dunn (D) for a term of five years from January 2000. In February 2003, B and G ceased to practise as solicitors and abandoned the offices. They did not pay the rent due on 25 March 2003 and made no further payments thereafter. In January 2004, R and D sued for the rent arrears due. B and G served a defence contending that their landlords had failed to mitigate loss arising from any non-payment of rent, which they could have done by forfeiting the lease. B and G also argued that the landlords failed to instruct agents to market the premises; failed to accept an offer of a prospective tenant who wanted to take an assignment or a new lease of the offices; and failed to accept an offer from B to negotiate payment of a consideration for surrender of the lease.
The county court hearing considered whether it is necessary, as a matter of law, for a landlord to mitigate his loss when seeking to recover rent arrears. The judge held that a landlord was under no such duty. B and G appealed. The circuit judge dismissed the appeal. B and G appealed to the Court of Appeal.
Appeal dismissed
There are very few cases where an innocent party to a contract (in this case R and D), having chosen not to accept a repudiation of contract, was prevented from enforcing her/his contractual right to keep the contract alive and sue for any monies owed. This could only be prevented where damages would be an adequate remedy and where a decision to keep the contract alive would be wholly unreasonable.
The court considered whether R and D had acted wholly unreasonably in not finding a new tenant, rather than leaving it to B and G to propose one, or in rejecting a proposal made by B and G. The Court of Appeal decided that R and D had not acted wholly unreasonably.
Additionally, if market rent had been lower than the rent stated in the lease, damages would not be an adequate remedy for R and D if they had terminated the lease by way of forfeiture and re-let at a lower rent, because they could not recover damages to compensate for the loss of rent. Alternatively, if the market rent had been the same or higher, B and G could have taken their own steps to find an assignee. If they had done this, and R and D refused to accept them on reasonable terms, then B and G would have had a statutory remedy under the Landlord and Tenant Act 1985.
Finally, there was no authority to show that a landlord could recover damages from a former tenant in respect of loss of future rent after termination of a lease. Therefore, either damages were not an adequate remedy for the landlord, or the landlord would be acting reasonably in taking the view that s/he should not terminate the lease because s/he would not be able to recover such damages. | 
