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Commercial landlord duty to mitigate damages in MA?

Submitted by BurtG on Thu, 11/17/2011 - 09:50
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My business is probably not going to make it and I'll have to close in the next few months. My landlord is unwilling to renegotiate my lease and I still have almost two years left. The landlord claims that if I breach the lease by failing to pay my rent then he will be able to enforce the liquidated damages clause in the lease that says all future rent payments will be accelerated and must be paid by me. That sounds crazy. Am I totally screwed on this? Doesn't the landlord have some kind of obligation to mitigate damages by finding a new tenant? Thanks.

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Commercial lease and mitigation of damages

Submitted by The Editor on Thu, 11/17/2011 - 10:29.

Possibly.  As you may know from reading other posts on The Forum, in the context of residential leases, the landlord has a duty to mitigate damages by making reasonable efforts to locate a new tenant after his tenant breaks the lease.  However, in 2007, the Massachusetts Supreme Judicial Court published an opinion that seems to set a different precedent for commercial leases.  In Cummings Properties, LLC v. National Communications Corporation, 449 Mass. 490 (2007), the Court approved the enforcement of a liquidated damages clause in a commercial lease that required the acceleration of all rent due for the remainder of the term.  The  Defendant in the case, a commercial lessee, had breached the terms of the lease by failing to pay the rent.

Since the Cummings decision, there have been few, if any, cases applying this new, fairly harsh, rule in a breach of commercial lease situation.  That could be because, in the wake of Cummings, tenants know that their landlords have the upper hand when a lease is breached.  I do not know.  However, if I were in your shoes, I would talk to a Massachusetts real estate attorney with commercial lease experience.  She should certainly be able to explain the best approach for you to take when dealing with your landlord.  A negotiated settlement may help you avoid the possibility of bankruptcy, a step that would be difficult for you but would also make it hard for your landlord to pursue a claim against you.  Good luck.

 

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