In Massachusetts, commercial landlords have a common law duty to mitigate the damage caused by a holdover tenant. Krasne v. Tedeschi and Grasso, 762 N.E.2d 841. 846-47 (Mass. 2002). See also 33A Mass. Prac. Landlord and Tenant Law § 15:27 (3d ed. 2003).
In Massachusetts, commercial landlords have a common law duty to mitigate the damage caused by a holdover tenant. Krasne v. Tedeschi and Grasso, 436 Mass. 103, 762 N.E.2d 841, 846-47 (2002). See also 33A Mass. Prac. Landlord and Tenant Law § 15:27 (3d ed.2003).
Id. at *2 (citations omitted). In Krasne v. Tedeschi and Grasso, 436 Mass. 103 (2002), the court stated: Termination of a lease ends a tenant's obligation to pay rent in the absence of any provision otherwise.
It is well settled in the Commonwealth that when a landlord terminates a lease following the default of a tenant, the tenant is obligated to pay the rent due prior to the termination but has no obligation to pay any rent that accrues after the termination unless the lease otherwise provides. See Krasne v. Tedeschi & Grasso, 436 Mass. 103, 109, 762 N.E.2d 841 (2002) ( “Termination of a lease ends a tenant's obligation to pay rent in the absence of any provision otherwise”). See also Locke v. Fahey, 288 Mass. 341, 343, 193 N.E. 26 (1934); Fifty Assocs. v. Berger Dry Goods Co., 275 Mass. 509, 514, 176 N.E. 643 (1931); Sutton v. Goodman, 194 Mass. 389, 394–395, 80 N.E. 608 (1907).
In general, we conclude that a lessor can satisfy the duty to mitigate damages by selling the property. See, e.g., BLT Burger DC, LLC v Norvin 1301 CT, LLC, 86 A3d 1139, 1146-1148 (DC, 2014), Krasne v Tedeschi & Grasso, 436 Mass 103, 109; 762 NW2d 841 (2002), and McGuire v City of Jersey City, 125 NJ 310, 321; 593 A2d 309 (1991). Where the sale of the property resulted in a price that compensated the landlord for the value of future rental income, there can be no damages awarded for lost rental income.
In its post-trial reply brief, Vesta cites a handful of cases from other states that have held the opposite: that a landlord may mitigate its damages by making commercially reasonable efforts to sell the property. See Doc. No. 177, at 4 (citing Hand Cut Steaks Acquisitions, Inc. v. Lone Star Steakhouse & Saloon of Nebraska, Inc., 298 Neb. 705 (2018); Tech Ctr. 2000, LLC v. Zrii, LLC, 363 P.3d 566 (Utah Ct. App. 2015); Krasne v. Tedeschi & Grasso, 436 Mass. 103 (2002)). Those out-of-state cases are obviously not binding on this Court, and, in light of the contrary cases just cited, do not appear to reflect the “weight of authority across the country,” but rather the existence of a split of authority.
The rationale of these cases appears to be that when a landlord sells its property after a tenant defaults, the landlord is fully compensated for any future losses, because the sale price takes into account the expected future income from rental. See, e.g., Krasne v. Tedeschi & Grasso, 436 Mass. 103, 109, 762 N.E.2d 841, 847 (2002). And it is true that typically a contracting party is not entitled to a windfall or double recovery for the same injury.
Def.'s Br. 14 [ECF No. 190]. The USPS also argues that they do not owe any post-sale rent because the sale of the property fully mitigated Plaintiffs' damages. Id. [ECF No. 190]. The USPS relies on two state cases for this position: Kranse v. Tedeschi & Grasso, 762 N.E.2d 841 (2002) and McGuire v. Jersey City, 593 A.2d 309 (1991). The USPS contends that in both cases the courts found the lessor's sale of the building constitutes mitigation precluding recovery of post-sale rent.
The court stated: "A party becomes liable on a contractual agreement, even a lease agreement with a future date of commencement, at the moment it is executed." Id. at 582; see also Krasne v. Tedeschi and Grasso, 762 N.E.2d 841 (Mass. 2002) (holding that a former general partner of a law firm could be held liable for the partnership's unpaid rent); contra Oxford Mall Co. v. K&B Missouri Corp., 737 F. Supp. 962, 966 (S. D. Mo. 1990) (holding that a dissociated partner could not be held liable for breach of a lease agreement that had been executed before dissociation if the wrongful events occurred after dissociation). AMICO argues that it issued the Bonds "based on the credit of the partnership and the confidence reposed in the ability of the partnership."
The defendants' theory is a novel one, and while it may find support in economic theory, it lacks support from precedential case law. The case upon which the defendants most rely, Krasne v. Tedeschi and Grasso, 762 N.E.2d 841 (Mass. 2002), is inapposite. In that case, the landlord was not required to give credit for future expected rents.