Lease Defaults and the Efficient Mitigation of Damages

28 Pages Posted: 5 Apr 2002

See all articles by Thomas J. Miceli

Thomas J. Miceli

University of Connecticut - Department of Economics

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law

Geoffrey K. Turnbull

Georgia State University - Department of Economics

Date Written: June 2006

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 (based on contract principles) does. An economic model of leases in which absentee tenants may or may not intend to breach shows that the primary benefit of the traditional rule is to promote tenant investment in the property by discouraging landlord entry. In contrast, the advantage of the modern rule is to prevent the property from being left idle by encouraging landlords to enter and re-let abandoned property. The results of the model accord well with the historic use of the traditional rule for agricultural leases where absentee use was presumably valuable; and also with the emergence of the modern rule for residential leases, where the primary use of the property entails continuous occupation.

Keywords: Lease, default, mitigation

JEL Classification: K0, K1

Suggested Citation

Miceli, Thomas J. and Sirmans, C. F. and Turnbull, Geoffrey K., Lease Defaults and the Efficient Mitigation of Damages (June 2006). Available at SSRN: https://ssrn.com/abstract=304963 or http://dx.doi.org/10.2139/ssrn.304963

Thomas J. Miceli (Contact Author)

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-5810 (Phone)
860-486-4463 (Fax)

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law ( email )

Tallahasse, FL 32306
United States
850 644-4076 (Phone)

HOME PAGE: http://www.cob.fsu.edu/rmi

Geoffrey K. Turnbull

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States
404-651-0419 (Phone)
404-651-2737 (Fax)

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