COMMERCIAL LEASE MITIGATION MAY FINALLY BECOME A REALITY
In July 2020, we reported that a new bill had been introduced in the New York State legislature that would impose a duty on commercial landlords to "mitigate," or help reduce, damages when tenants breach their leases and prematurely abandon (or vacate) their spaces. As an update to that July piece, it has been reported that the bill has passed the New York State Assembly and has been delivered to the State Senate, where it is being reviewed by the Senate Judiciary Committee (S1129).
Residential landlords have been under a duty to mitigate damages since 2019 (pursuant to Real Property Law § 227-e, which took effect following the passage of the historic pro-tenant Housing Stability and Tenant Protection Act of 2019). Commercial landlords, however, were exempt from that requirement.
The justification cited in support of the proposed change, follows:
“New York State has restored the duty of landlords to mitigate damages when a tenant vacates before the end of a lease term for residential units. This public policy decision is based on the long-standing principle of the duty of a plaintiff to minimize damages. This sound principle, now applied to residential units, is also good public policy to protect commercial tenants from property owners who make no effort to re-rent a vacant property or minimize damages. Currently, it is common for commercial leases to include such a provision. This legislation would extend the state policy to commercial landlords and tenants on a uniform basis.”
This bill offers a much-needed protection for small businesses and other commercial tenants, who are facing tremendous financial hardship due to the coronavirus pandemic and its devastating impact on our economy.
We hope that the legislative and executive branches will proceed, without further delay, to pass this bill into law.
The full text of the bill may be found here - https://legislation.nysenate.gov/pdf/bills/2021/S1129.