Discussion - case law on landlord mitigating losses, as above in stickies!

[MrShed]

Mainly to Joa, but open to anyone!

I have just read the case law as in the stickies above. First of all Joa do you have a link to the full transcript?

I am not so sure that it would apply to residential tenancies, for two reasons:

- There is no mention in the description above of the commercial tenants giving any notice - this is a big issue.
- Perhaps more importantly, I believe(although I do not know commerical property very well so could be wrong!) that the vast majority of commercial tenants have the right to assign their tenancy - therefore, the onus is on the tenant to find new tenants. This is not the case for residential tenancies.

Discuss

[Joa]

Hi Mr Shed

This is a Court of Appeal case 1) Reichman (2) Dunn v (1) Beveridge (2) Gauntlett thatnscript attached. I had a client who rented privately and spoke to an oganisation who acts as our advice service's legal consultants, I sought opinion from three solicitors in their team and none thought that my client would have a case on the mitigation of loss issue following that CoA's decision.
I know however that in view of this very unfavourable decision, Shelter is working hard on different interpretation and will be very happy to add any updates.
Has this been discussed on Landlordzone?

The Transcript:
(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.

[Joa]

anyway, stop trying to divert my attention, sheddy, you better tell me how you are getting on with the deposit step-by-step?
i've done my bit for the punters, and you are just lazying about

[MrShed]

I'll tell you what Joa, I'll get it done as soon as you rake out some legal argument for the above not being applicable to residential tenancies see you next year!!

On a serious note, I'll be trying to do a few odds and sods on the stickies this weekend or tonight

[Joa]

oh you awful awful bully! you know very well that i don't want to find any arguments which would harm private tenants! But if that means showing you, just you wait!

[MrShed]

Ooops I meant proving that residential landlords DID have to mitigate their losses