Leon Silver of the Phoenix office of Gordon & Rees authored an article published in In-House Defense Quarterly this fall. The article, titled “Mitigation of Damages in Commercial Lease Abandonment Cases,” discusses how courts of different states address the burden to prove mitigation efforts and looks at the kind of evidence that courts regard as proving or disproving reasonable efforts.
First, Silver provides an example of commercial lease abandonment from an actual case in which the Arizona Court of Appeals ruled that a) the landlord did have a duty to mitigate and b) that this was an affirmative defense, so the burden of proof to show failure to mitigate is on the defaulting tenant.
This approach is recognized as the “modern trend”. Courts holding this view see no logical reason to treat a commercial lease differently than other commercial contracts. Twenty-eight states have adopted this modern trend view. It is a judge-made rule; however, other states resist the trend and stay with common law view of a lease.
Few courts, if any, directly state that a commercial lease relationship should be governed solely by property law. Silver explains that fifteen states still, out of respect for stare decisis, continue to follow the no mitigation view that arose from such an understanding. Some states apply a mixed doctrine that is treated as both property and contract elements. A tenant or landlord can find that the issue of mitigation will be decided by the side that has the burden of proof. There are sound reasons to assign the burden of proof on mitigation to the landlord. “We believe as time passes, additional states, will adopt the view that assigns the burden of proof to the landlord. It behooves us as attorneys, therefore, to advise our landlord clients to make the necessary efforts and to document what they have done, so that they will be able to meet the burden if it is imposed on them.” Silver advises that landlord clients make reasonable efforts to re-lease abandoned premises and to keep careful records of those efforts in case it becomes necessary to offer such proof in litigation.
Silver is the co-Managing partner of the Phoenix office of Gordon & Rees and serves as National Practice Group Leader for the firm's Retail & Hospitality Practice Group.