Real Property Flashcards
The issue is whether the landlord can argue that he lawfully withheld his consent to the assignment of the lease?
Here, the tenant attempted to assign her lease—that is, to transfer the balance of the lease term— to a lawyer. A restriction on assignment is a valid restraint on alienation. William B. Stoebuck & Dale A. Whitman, The Law of Property 379 (3d ed. 2000). Because a restraint on transfer by assignment is valid, the lease provision here prohibiting an assignment without the landlord’s consent was valid.
The landlord will argue that he was free to withhold his consent for any reason or for no reason at all. The clause in the tenant’s lease is commonly described as a “silent” consent clause because it does not include an express standard or condition for the giving or withholding of consent. John G. Sprankling, Understanding Property Law 286 (3d ed. 2012). Under the traditional rule—still the majority rule today—a silent consent clause gives the landlord the right to withhold consent for any reason or for no reason—even if the withholding of consent is arbitrary and unreasonable. Id. at 287. (That rule, however, is subject to statutory housing discrimination laws that are not at issue here.)
Alternatively, the landlord will argue that, even if this jurisdiction is one of the minority group in which refusal to consent to an assignment must be reasonable, his refusal was reasonable in light of his personal experiences renting to lawyers; his refusal represented a legitimate business judgment.
The issue is whether the landlord can successfully argue that he did not accept the tenant’s surrender of the apartment?
Abandonment occurs when a tenant vacates the leased premises before the end of the term, has no intent to return, and defaults in the payment of rent. Sprankling, supra, at 293. Under traditional common law principles, a landlord has three options when a tenant abandons the premises: (1) accept a surrender of the premises, thereby extinguishing the tenant’s duty to pay rent due after the acceptance of surrender; (2) re-let or attempt to re-let the premises on the tenant’s behalf, and recover from the tenant damages based on the difference between what the tenant owed for rent and what the landlord collected from re-letting; or (3) leave the premises vacant and sue the tenant for unpaid rent as it accrues. Id. at 294; Stoebuck & Whitman, supra, at 403.
Here, on July 25, 2015, the tenant vacated the apartment and left the keys in an envelope in the landlord’s mail slot with a note stating that she was moving abroad, would not return before the end of the lease, and would not pay any rent from August 1 onward. The landlord emailed the tenant the next day and acknowledged that he had found the keys and the note. “Although this is a problem you created,” he wrote, “I want to be a nice guy and help you out. I feel pretty confident that I can find a suitable tenant who is not a lawyer to rent your apartment.”
The landlord will argue that he did not voluntarily accept the keys; they were merely placed in his mail slot and the statement in his email was merely an offer to attempt to re-let the premises on the tenant’s behalf. His email emphasized, “this is a problem you created,” which implied that it was the tenant’s problem to resolve. This interpretation is bolstered by the landlord’s statement of his willingness to “help [the tenant] out.” Nowhere in the email did the landlord state that he was releasing the tenant from her obligations under the lease.
Furthermore, the facts state that local residential rents had declined precipitously since early July, and it is unlikely that the landlord would voluntarily suffer any financial loss resulting from a re-let at a reduced rent
The issue is whether the landlord can argue that he had no duty to mitigate, but even if he did have a duty to mitigate, he had fulfilled that duty?
In a jurisdiction following the common-law no-mitigation rule, the landlord will argue that he had no duty to mitigate and that, because he did not accept the tenant’s surrender (see Point One(b)), he is entitled to the 17 months of unpaid rent. In a jurisdiction that has enacted a statute requiring the landlord to mitigate, he will argue that that duty was satisfied. See Unif. Residential Landlord Tenant Act § 1.105(a) (1972). He advertised available apartments with a sign in front of the building, in a newspaper, and on a website, and that should be sufficient mitigation. The landlord also showed the tenant’s apartment along with the other vacant apartments to prospective tenants, thereby providing a fair chance that the tenant’s apartment would be rented before other apartments in the landlord’s rental pool. On these facts, a court most likely would find that the landlord made reasonable efforts to mitigate.
Of those states requiring mitigation, none requires that mitigation be successful; in fact, if a court determined that the landlord made reasonable efforts to mitigate but was unsuccessful, the court would find that the landlord would be entitled to damages equal to the difference between the tenant’s promised rent ($2,000/month) and the apartment’s fair rental value. Given that the landlord took reasonable steps to mitigate and was unable to rent the tenant’s unit “at any price,” it appears that the fair rental value of the tenant’s unit is $0. Thus, the landlord’s position would be that he is entitled to $34,000 in damages ($2,000/month for 17 months). In other words, if the landlord did not accept the surrender, then regardless of whether the landlord had a duty to mitigate, the landlord is entitled to the 17 months of unpaid rent.
The issue is whether the tenant can argue that the landlord unreasonably refused to the consent to the assignment of the lease?
The tenant should concede that the lease required the landlord’s consent to an assignment. However, she will argue that the law requires the landlord to act reasonably in rejecting the proposed assignment and here the landlord was unreasonable. There is an emerging modern trend that a landlord’s consent not be unreasonably withheld, which is based upon the principle that leases are subject to the good faith requirements of contracts in general. Thus, a minority of courts require that a landlord have a reasonable basis for withholding consent to a proposed transfer.
Factors that may be considered under a reasonableness test include the proposed assignee’s financial ability to pay, the suitability of the premises for the proposed assignee’s use, and the need for alterations to accommodate the proposed assignee’s use. Kendall, supra, at 842. It is not commercially reasonable to deny consent solely on the basis of personal taste, convenience, or sensibility. Id. Here, the facts suggest that the lawyer had the financial ability to pay the rent, and there is no indication that the lawyer intended to use the apartment for anything other than a residence. The tenant will also argue that the landlord’s stated objection— “I’ve learned from personal experiences with [lawyers] as tenants that they argue about everything, make unreasonable demands, and make my life miserable”—is merely a matter of personal taste or convenience, and thus the landlord’s refusal to consent was unreasonable.
The issue is whether the tenant can argue that the landlord accepted her surrender and therefore is not entitled to unpaid rent?
The tenant will argue that the landlord accepted her surrender of the premises when he accepted the keys and emailed her, stating, “Although this is a problem you created, I want to be a nice guy and help you out. I feel pretty confident that I can find a suitable tenant who is not a lawyer to rent your apartment.” Those words could be construed as a willingness to help the tenant by releasing her from her obligations under the lease. If the lease was terminated by the landlord’s acceptance of the surrender, the landlord had no right to any rent after he accepted the keys and sent that email on July 26, 2015.
The issue is whether the tenant can argue that that even if the surrender was not accepted, the landlord had a duty to mitigate and failed to do so?
Alternatively, the tenant will argue that even if the landlord did not accept the surrender, he still had a duty to mitigate damages and that he failed to fulfill that duty. While most jurisdictions today reject the common-law rule that a landlord has no duty to mitigate, there is little guidance as to what efforts are sufficient to satisfy the mitigation requirement. Sprankling, supra, at 299. Some statutes have defined reasonable efforts as “steps which the landlord would have taken to rent the premises if they had been vacated in due course, provided that those steps are in accordance with local rental practice for similar properties.” Me. Rev. Stat. Tit. 14 § 6010-A (2); Wis. Stat. § 704.29(2). The tenant might argue that the landlord should have shown the tenant’s apartment to the exclusion of other vacant apartments in the landlord’s rental pool. She might also argue that there was some other deficiency in the landlord’s efforts. Her arguments on this point are weak, as noted above in Point One(c).
Lastly, the tenant will claim that because the landlord’s efforts to mitigate were insufficient, his claim that he could not rent the tenant’s apartment at any price is irrelevant. The tenant will further argue that the landlord is not entitled to 17 months of unpaid rent ($34,000) under the lease but would only be entitled to the difference between the rent owed under the lease and the fair rental value (i.e., the amount of rent the landlord could have recovered if he had made reasonable attempts to secure a substitute tenant). The fair rental value is presumably $1,000 a month in light of the fact that he was able to rent two of the other apartments for that amount. That would reduce the landlord’s damages to $17,000 (unpaid rent of $34,000 for the 17 months less $17,000, the fair rental value of the apartment over the 17-month period). Sprankling, supra, at 299.
In some jurisdictions, a landlord’s failure to mitigate would relieve the tenant of any liability for rent or damages after the date of abandonment because by failing to mitigate, the landlord is deemed to have accepted the surrender. See Unif. Residential Landlord and Tenant Act § 4.203(c). In those jurisdictions, the landlord would be entitled to no damages.
