| ICSC Legal Database - Cases | Monday, February 22, 1999 05:04 PM |
| Citation: |
| Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293 (Tex. 1997). |
| Issue: |
| Whether a landlord has a duty to make reasonable efforts to mitigate damages when a tenant defaults on a |
| Facts: |
| The Plaintiff, a Commercial Landlord, agreed to convert office space into suites suitable to the Defendant Real |
| Estate Brokerage’s needs. The Plaintiff received conflicting instructions about how the suites should be |
| completed and discontinued improvements pending the assignment of a single spokesperson for the Defendant. |
| When the Defendant failed to appoint such a spokesperson, the Plaintiff declared the failure an anticipatory |
| breach of the contract and brought suit. The Defendant attempted to prove that the Plaintiff failed to mitigate the |
| damages resulting from the breach, citing the Plaintiff’s refusal to lease the premises to members of the |
| Defendant’s brokerage, as well as differences in the advertising style used by the Plaintiff in attempting to lease |
| the property after the breach. The trial court held that the Plaintiff had no duty to mitigate and the court of |
| appeals affirmed that decision. |
| Holding: |
| Reversed and remanded. Given the contractual nature of modern leases, the court |
| holds that a Landlord does have a duty to make reasonable efforts to mitigate damages in the following |
| (1) bringing suit for anticipatory breach; |
| (2) the landlord actually reenters the property while exercising the option to maintain the lease in effect |
| and sue for rent as it becomes due; or |
| (3) the landlord has a contractual right to reenter the premises without accepting surrender, forfeiting the |
| lease or being construed as evicting the tenant while maintaining the lease in effect and suing for rent as it |
| In these situations, the Landlord must use objectively reasonable efforts to fill the premises, but the replacement |
| tenant must be suitable under the circumstances and need not be the first willing tenant. Also, there is no |
| cause of action for a failure to mitigate, but rather a reduction in the Landlord’s recovery to the extent that |
| damages could have reasonably been avoided. The burden is on the tenant to show mitigation (used to rebut |
| damages claimed) or failure to mitigate (must be raised as an affirmative defense). |
| Classification 1: |
| Landlord and Tenant |
| 01471 - Journal - Fall 1998 |
|
