By Stuart Cappus
Tenants and landlords often enter into fixed-term rental agreements. Commonly referred to as leases, these agreements provide the parties with some assurance as to how long the tenancy will last. But what if a tenant breaks the lease by moving out early before the term is up?
When this happens, the landlord has the right to sue the tenant for the amount of rent the latter would have paid for the balance of the term. However, there is one very important caveat to that general rule. In all claims for damages, the law requires an aggrieved party to do whatever he can within reason to minimize his losses. This is known as the duty to mitigate. For a landlord who wants to sue a tenant for breaking a lease, this duty to mitigate means that the landlord must do whatever is reasonable to try to reduce the amount of money he will be out because of the tenant’s breach. In most situations, this means trying to re-rent the unit to another tenant. If the landlord succeeds in finding another tenant, he can then sue the former tenant for the rent he lost up until the time the new tenant moved in. As an example, if it takes two months for the landlord to re-rent the unit after the tenant moves out with six months left on the latter’s lease, then the landlord can only sue the tenant for two months’ worth of rent.
The duty to mitigate arises once a landlord knows or ought to know that the tenant is breaching his lease. As a result, it is very important for landlords to pay attention to the actions of their tenants and to act quickly to reduce their damages once they learn of a breach.
In one of our cases, Stuart represented a tenant who, for various reasons, had to break his lease by moving out of his rental property one year before the end of his term. He gave the landlord two months’ notice of his intention to move out. The landlord had originally intended to sell the property when the lease expired. However, once the tenant left, instead of trying to re-rent the property, the landlord put it up for sale. The landlord subsequently claimed that the amount of money he sold the property for was less than what he would have received had he sold it one year later when the lease was supposed to expire, and sued the tenant for the difference.
At the Dispute Resolution hearing, Stuart argued that the landlord had failed to mitigate his losses by doing what any reasonable landlord would have done in that situation: re-rent the property to another tenant. He further argued that the two months’ notice given to the landlord was more than enough time for him to advertise the property and try to find another tenant. The arbitrator agreed with Stuart’s arguments and dismissed the landlord’s claim.