Tennessee commercial landlord/tenant (lessor/lessee) law requires a lessor of a commercial property to act fairly and reasonably, under the circumstances, to mitigate its lost rental income resulting from a lessee/tenant abandoning the property before the expiration of the lease term or notifying the lessor that it no longer intends to comply with the lease. Obviously, this requirement means that the lessor must try to secure a new tenant for the subject property. However, what steps on the part of the lessor satisfy its obligation to act fairly and reasonably to find a new tenant to mitigate its damages necessarily must be decided on a case-by-case basis given the varying interpretations that can be applied to the “fair and reasonable” standard.
Since there are no bright lines to apply to determine whether a landlord has satisfied its obligation to mitigate its damages, it is helpful to look at a few cases on the subject to understand what factors might be important to a Tennessee court faced with an argument from a lessee that what it owes to the lessor should be reduced because the lessor’s attempts to find a new lessee fell short of satisfying the reasonable and fair standard.
Loans Yes v. Kroger Limited Partnership (Tenn. Ct. App. 2020): In this case, the court rejected the tenant’s argument that the landlord had failed to mitigate its damages. The tenant stopped paying rent six months before the lease expired. Within about one month after receiving the tenant’s notice that it wanted to terminate the lease early, the landlord signed a listing agreement with a commercial broker who agreed to undertake re-leasing the property. The broker, promptly thereafter, sent out an email blast to about 335 other brokers notifying them of the availability of the property. The broker also listed the property on several websites known to be used by brokers and by prospective tenants. Moreover, the broker placed the property on his company’s availability report which was accessible by about 500 other brokers.
Kahn v. Penczner (Tenn. Ct. App. 2008): In this case, the trial court determined that the landlord’s lost rental income damages should cut in half because it failed to mitigate its damages.