Daily Development for Friday, March 25, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

LANDLORD/TENANT; LANDLORD’S REMEDIES; DAMAGES; DUTY TO MITIGATE:  In Texas a tenant defending a rent claim on the grounds that a landlord has failed to mitigate damages following lockout of tenant has the burden of proof of showing not only that the landlord could have mitigated, but also of showing how much the landlord would have obtained in mitigating.  Failure to prove the amount that mitigation might have produced will result in no reduction in the rent claim.

Cole Chemical Distributing Inc. v. Gowing, 2005 Tex. App. LEXIS 2109 (Tex. App. 3/15/2005)

Gowing apparently was subletting space an office complex to Cole.  Cole fell delinquent in rent, and an agent that Gowing sent to the space to deliver an invoice for back rent reported that the space was vacant and that Cole had moved across the hall to larger space.

Gowing sued for $27,000 in rent, but the trial court awarded only about $950, finding that Gowing had failed to make reasonable attempts to mitigate by reletting the space prior to the lawsuit.  As a consequence of the tiny recovery, the trial court also awarded a tiny attorney’s fee recovery.

On appeal: Held: Reversed.  The appeals court found that $27,000 rent claim was appropriate and remanded for the trial court to rethink the attorney’s fee award in light of the new judgment on the validity of Gowing’s claim.

The Texas court noted that under Texas law a tenant must plead and prove that the landlord failed to mitigate and that mitigation efforts would have reduced the landlord’s damages claim.  Here, although the tenant did show that the Landlord had not properly mitigated, it had not demonstrated what amount of reduction in the rent claim Landlord’s mitigation efforts would have produced.

As the court presumed that the low attorney’s fee award reflected the low damages award, it decided to return the attorney’s fee tquestion to the lower court, now that the damages were markedly higher.

The court also held that actual notice to a tenant from the landlord that the landlord has repossessed the premises eliminates  the Texas requirement that a landlord post on property it has repossessed the name and address of the party to contact should tenant elect to pay the rent and be restored to possession.

Comment: The Texas position here is not the rule everywhere, and in fact is likely to result in few actual reductions in damages.  Typically, if a landlord fails to take efforts to mitigate, its rent claim is reduced by the fair rental value of the property.  Although Texas has many rules that favor commercial tenants, this one is decidedly on the conservative side.  In many cases, unless Tenant actually produces a substitute tenant, the Texas result will be pretty much the same as the result in states that recognize no duty to mitigate.

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