Tread Carefully When a Tenant Surrenders
Most owners are happy when a below-market rent-stabilized or rent-controlled tenant surrenders possession. However, when the rent is above or near the market rent, a vacant apartment can remain empty for a long time without any rent being paid. So, owners should be careful that they do not release tenants from the balance of the lease when they vacate and abandon the premises before the lease expires. The law is that an owner has no duty to re-rent the apartment before the lease expires (that is, no duty to mitigate its damages). The lead case is Holy Props. v. Cole Prods., 87 NY2d 130 (1995).
I had a case recently where the owner relied on its agent to handle the situation when the tenant abandoned the lease before it expired. The monthly rent was over $4,000 per month. The agent was unaware that there was no duty to mitigate and by her actions released the tenant from the lease and then tried to re-rent the apartment. Meanwhile, the apartment was vacant and brought in no rent for over a month. The owner should have contacted its attorney to prepare a carefully crafted letter. The letter would apply the law in Holy Props. v. Cole Prods. and inform the tenant that he is still responsible for the rent until the lease expires and that the owner will act on behalf of the tenant to try to re-rent the apartment.
In that case, the tenant will be responsible for the rent until the apartment is re-rented and, if for less than the amount in the lease, the difference between the lease amount and the amount the new tenant pays. This approach helps an owner hedge its bets to cover the situation where the tenant who abandons the premises has no money to pay a judgment or otherwise makes it difficult to collect on the judgment. Whether a judgment can be collected from the tenant who abandons should be part of any decision whether to let the apartment sit vacant until the lease expires or to try to re-rent. There are two steps to getting paid. The first step is getting the judgment. The second step is collecting on the judgment. When an owner performs its due diligence by obtaining financial information from the tenant before renting, the owner helps make sure that the rent will be paid, that the tenant will not vacate before the lease expires, and that the owner will be able to collect on a judgment.