Saturday, January 31, 2009

Texas Landlord Remedies for Commercial Rent and Anticipatory Breach and Abandonment

If you are a commercial property owner in Texas and the tenant tells you they are leaving mid lease term, what are the options for the landlord? The Texas Supreme Court set out a Texas landlord's options for abandonment and breach of the lease as follows:

The Landlord has four causes of action against a tenant for breach of the lease and abandonment. First, the landlord can maintain the lease, suing for rent as it becomes due. Second, the landlord can treat the breach as an anticipatory repudiation, repossess, and sue for the present value of future rentals reduced by the reasonable cash market value of the property for the remainder of the lease term. Third, the landlord can treat the breach as anticipatory, repossess, release the property, and sue the tenant for the difference between the contractual rent and teh amount recived from the new tenant. Fourth, the landlord can declare the lease forfeited (if the lease so provides) and relieve the tenant of liability for future rent.

Austin Hill Country, 948 SW2d at 299-300.

It should be remembered that under Texas Property Code Sec. 91.006, a Texas landlord has a duty to mitigate (in other words, try to relet the premises). However, the actual burden of proof is on the tenant to show that the landlord failed to mitigate and also show the amount that could have been saved but for the landlord's failure to mitigate. Id.

Recovery of past rent is a rental "arrearage" while recovery of future rent is considered "future damages". PRC Kentron, Inc. v. First City Center Associates, II, 762 SW2d 279, 281 and 288 (Tex.App.-Dallas 1988, writ denied). A prevaling landlord may also recover reasonable attorneys fees. West Anderson Plaza v. Exxon Mehdi Feyznia, 876 SW2d 528, 537 (Tex. App.-Austin 1994, no writ).

It should also be noted that a Texas statutory landlord's liens in the personal property may be affected by the abandonment of the property. A landlord may need to seek a distress warrant under Texas Property Code Sec. 54.025, since a statutory landlord's lien only lasts for one month after the day the tenant abandons the property under Texas Property Code Section 54.024.

The landlord needs to select a remedy, however, since choosing to terminate a lease may eliminate the ability to recover future damages. It is suggested that a Texas landlord consult with an attorney to evaluate these options.

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