What are your damages when a tenant breaches his lease?
California landlords and attorneys who are dealing with real estate lawsuits relating to delinquent tenants must figure out what a tenant will owe as the result of the tenant’s Breach of Lease. California law provides that the landlord may recover (1) the unpaid rent to the date of termination (i.e., past rent that is already owed), plus (2) any difference between the rent owed going forward less the rent from a new tenant (if that rent is less) (i.e., if the original lease was $10,000 per month but the new market rent is only $8,000, you can re-rent the property for the $8,000 and collect the difference [$2,000] from the former tenant). You can collect this difference for the remainder of the original lease term.
California law also provides that the landlord must mitigate his or her damages. It is the obligation of the lessee to prove that all or a portion of the rent sought could have been “reasonably avoided.” This means that the landlord must make a reasonable effort to lessen his or her damages by marketing and re-leasing the space.
“A plaintiff cannot be compensated for damages which he[or she] could have avoided by reasonable effort or expenditures…. The doctrine does not require the injured party to take measures which are unreasonable or impracticable or which would involve expenditures disproportionate to the loss sought to be avoided or which may be beyond his [or her] financial means.” Lu v. Grewal (2005) 130 Cal.App.4th 841, 850.
Lastly, there are additional damages which can be pursued. The landlord is also entitled to any other damages caused by the breach. For example, to the extent the landlord would not have had to incur such expenses had respondents performed under the lease, the landlord is entitled to reasonable expenses in retaking possession of the property, in making repairs respondents were obligated to make, in preparing the property for reletting, and damages for breach of specific covenants of the lease—a promise to maintain or restore the premises upon termination of the lease.
If the lease itself has an attorney’s fees provision, California law allows the prevailing party to recover its attorney’s fees. This is usually the landlord in a breach of lease case.
Because the potential damages in a real estate lawsuit are significantly more than a tenant’s unpaid rent, California landlords and lawyers should use the prospect of these damages to encourage a tenant to settle before any lawsuit is filed.