LEASE DEFAULTS AND THE EFFICIENT MITIGATION OF DAMAGES* |
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| Authors: | Thomas J Miceli CF Sirmans Geoffrey K Turnbull |
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| Institution: | 1. Department of Economics, University of Connecticut, 341 Mansfield Road, Storrs, CT 06269. E‐mail: thomas.miceli@uconn.edu;2. The J. Harold and Barbara M. Chastain Eminent Scholar in Real Estate, Department of Risk Management/Insurance, Real Estate and Business Law, Florida State University, 821 Academic Way, Tallahassee, FL 32306. E‐mail: cfsirmans@cob.fsu.edu;3. Department of Economics, Georgia State University, P.O. Box 3992, Atlanta, GA 30302‐3992. E‐mail: gturnbull@gsu.edu |
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| Abstract: | ABSTRACT The traditional law of leases imposed no duty on landlords to mitigate damages in the event of tenant breach, whereas the modern law of leases does. An economic model of leases, in which absentee tenants may or may not intend to breach, shows that the traditional rule promotes tenant investment in the property by discouraging landlord entry. In contrast, the modern rule prevents the property from being left idle by encouraging landlords to enter and re‐let abandoned property. The model reflects the historic use of the traditional rule for agricultural leases, where absentee use was valuable, and the emergence of the modern rule for residential leases, where the primary use entails continuous occupation. |
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