Reid v. Mut. of Omaha Ins. Co.

776 P.2d 896 (Utah Sup.Ct. 1989)

 

RULE:

A landlord who seeks to hold a breaching tenant liable for unpaid rents has an obligation to take commercially reasonable steps to mitigate its losses, which ordinarily means that the landlord must seek to relet the premises.

FACTS:

Defendant tenant complained to plaintiff landlord about the adjoining tenant’s activities which interfered with defendant's business. Defendant gave notice and vacated the premises. Plaintiff sued for breach of the lease contract, claiming monthly rental for the three and a half years remaining on the five-year term. Plaintiff remodeled the premises and leased them to the adjoining tenant, who vacated before the end of the trial. The premises were left vacant. The court found defendant liable for breach of the lease and awarded damages to plaintiff. The state supreme court affirmed the judgment of liability in favor of plaintiff but reversed in part on the determination of damages.

ISSUE:

Did plaintiff landlord have a duty under Utah law to mitigate its damages by reletting premises after defendant tenant wrongfully vacated and defaulted on its covenant to pay rent?

ANSWER:

Yes.

CONCLUSION:

Utah law imposed a duty upon landlords to mitigate their damages by reletting premises after a tenant had wrongfully vacated and defaulted on the covenant to pay rent. Leases were commercial transactions and contractual in nature. The economies of both the state and the nation benefited from a rule that encouraged the reletting of premises, which returned them to productive use, rather than one which permitted a landlord to let the premises sit idle while it sought rents from the breaching tenant. Accordingly, that part of the trial court's order which awarded plaintiff landlord damages for rents that accrued after the trial, without imposing on plaintiff a continuing affirmative duty to mitigate accruing losses would be reversed.

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