Law

New York State

Real Property Law § 227-e Landlord duty to mitigate damages

New York City

New York City Administrative Code Title 26 Housing and Building, Chap 34 Fees Associated with Vacating a Premises§ 26-3401 Definition § 26-3402 Limitation of Fees

Cases

14 E. 4th St. Unit 509 LLC v Toporek, 203 AD3d 17 [1st Dept 2022], lv to appeal dismissed, 38 NY3d 1019 [2022]

In enacting Real Property Law § 227-e, the legislature resolved an issue that had plagued the courts, since 1995 when Holy Props. L.P. v. Kenneth Cole Prods., 87 N.Y.2d 130, 637 N.Y.S.2d 964, 661 N.E.2d 694 (1995) was decided by the Court of Appeals, holding that there is no duty to mitigate damages in the context of lease agreements. Although Holy Properties concerned a commercial lease, most courts applied its holding to residential leases as well. In Holy Properties the issue was whether landlord was under an obligation to mitigate damages when tenant abandoned the premises. The Court held that once a tenant abandons the premises before the lease term, “landlord [is] within its rights ... to do nothing and collect the full rent due under the lease” (Holy Props. at 134, 637 N.Y.S.2d 964, 661 N.E.2d 694). This, as the Court acknowledged, was a departure from the general rule of law that parties to a contract have a duty of “making reasonable exertions to minimize the injury,” that is to mitigate damages (id. at 133, 637 N.Y.S.2d 964, 661 N.E.2d 694). Although some courts distinguished between residential and commercial leases, finding that in the context of residential landlord-tenant leases, there is affirmative duty to mitigate damages, they did so by following older precedent (see e.g. 29 Holding Corp. v. Diaz, 3 Misc. 3d 808, 817, 775 N.Y.S.2d 807 [Sup. Ct., Bronx County 2004]; Palumbo v. Donalds, 194 Misc. 2d 675, 754 N.Y.S.2d 856 [Civil Ct., Kings County 2003]). Real Property Law § 227-e now clearly holds that the duty to mitigate damages applies to all residential leases in New York State. It also clarifies that the doctrine of mitigation of damages is not an affirmative defense to be asserted by a tenant, but rather the burden is on landlord to establish it took reasonable and customary actions to “render the injury as light as possible” (Wilmot v. State of New York, 32 N.Y.2d 164, 168, 344 N.Y.S.2d 350, 297 N.E.2d 90 [1973]).
 

Commentary

Before HSTPA, landlords did not have an obligation to mitigate damages if a tenant broke the lease by vacating early. Following time-honored precedents like Holy Properties Ltd., L.P. v. Kenneth Cole Productions, Inc., [87 NY2d 130 (1995)] New York courts permitted landlords to leave the apartment vacant for the remainder of the lease. The tenant would be liable for rent through the end of the term. HSTPA now provides in RPL § 227-e that landlords of residential units must “in good faith and according to the landlord's resources and abilities, take reasonable and customary efforts to rent the premises at fair market value or at the rate agreed to during the tenancy, whichever is lower.” Any lease provision to the contrary is void as against public policy.
 

Gerald Lebovits et. al., New York's Housing Stability and Tenant Protection Act of 2019: What Lawyers Must Know-Part III, NY St BJ, December 2019, at 33, 41

Lexis

Damages are not Recoverable for Avoidable Consequences 2 Corbin on New York Contracts § 57.06 (2023)

Form No 435:14 Defense That Landlord Failed to Mitigate Damages as Required by Real Property Law § 227-e 23 Bender's Forms of Pleading Form No. 435:14 (2023)

Lease Restrictions and Breach of Lease, 4 NY Practice Guide: Real Estate § 27.04 (2023)

Westlaw

Mark S. Dennison, Sufficiency of Landlord’s Efforts to Mitigate Damages Following Tenant’s Abandonment of Leased Premises, 72 Am. Jur. Proof of Facts 3d 155 (Originally published in 2003)

Mark S. Dennison, Landlord’s Recovery of Rent after Abandonment or Surrender of Leased Premises, 86 Am. Jur. Trials 1 (Originally published in 2002)