Damages Recoverable by Landlords and Tenants

Damages Recoverable by Commercial Landlords

In Tennessee, a landlord may recover from a tenant which has breached a commercial lease all damages which it takes to put the landlord in the same position it would have been in had the tenant not breached. A landlord may recover rent for the remainder of the lease term or, if it has managed to re-lease the property, but at a lower rate, the difference between the amount the breaching tenant agreed to pay and the rent actually received by the landlord for the lease term agreed to by the breaching tenant.

A landlord may also be entitled to recover expenses which it incurred in repairing or refurbishing the premises after the breaching tenant vacated as well for, in some cases, modifications, additions and alterations done for the purpose of leasing the premises to a new tenant. A landlord may also be entitled to recover expenses associated with attempting to find a new tenant such as advertising expenses. Where the commercial lease which was breached by the tenant required the tenant to pay utilities, the landlord may also recover the utility expenses necessary to preserve the condition of the property, e.g. utility payments to maintain an adequate temperature to prevent pipes from freezing, or to keep security lights operable.

Many, if not most, commercial lease agreements contain provisions which allow a landlord who proves a tenant breached a commercial lease to recover attorney’s fees and expenses incurred by the landlord.

In Tennessee, a landlord has a duty to try to mitigate its damages by leasing the vacated property. A landlord should keep detailed records of all efforts made to rent property which has been vacated by a tenant before the expiration of the agreed upon lease term so that it can prove, at trial, that it made reasonable efforts to mitigate its damages.

Damages Recoverable by Commercial Lease Tenants

If a tenant does not vacate the leased commercial property, but incurs expenses related to repairs or maintenance which were the responsibility of the landlord, it may recover those expenses. Where a tenant has been actually or constructively evicted from the leased premises, it may recover all damages which resulted to it because it had to leave the property, including, but not necessarily limited to:

• The amount by which its rent has increased if it finds new space. The increased amount of rent would be allowed only for the term of the breached lease
• Relocation expenses which could include not only moving expenses, but also, expenses associated with reconfiguring and installing phone equipment or computer equipment
• Lost profits resulting to its business
• Expenditures it made on the leased premises to improve, customize or modify the premises before the landlord breached if, at the time the lease was signed, the landlord should have reasonably foreseen that the tenant would make such expenditures

Just as a landlord has a duty to try to find a new tenant when a tenant breaches a commercial lease, a tenant has a duty to try and find new comparable space, in order to mitigate its damages, when it can no longer occupy the leased space because of the landlord’s breach. In a commercial lease case, a tenant who proves the landlord breached may be able to recover its attorneys’ fees and expenses as some commercial leases have terms allowing the recovery of such damages by a tenant.