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Lease Defaults and the Efficient Mitigation of Damages

Author

Listed:
  • Thomas J. Miceli

    (University of Connecticut)

  • C. F. Sirmans

    (Florida State University)

  • Geoffrey K. Turnbull

    (Georgia State University)

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.

Suggested Citation

  • Thomas J. Miceli & C. F. Sirmans & Geoffrey K. Turnbull, 2009. "Lease Defaults and the Efficient Mitigation of Damages," Working papers 2009-07, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2009-07
    Note: We acknowledge the helpful comments of Matthew Kahn and two reviewers.
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    References listed on IDEAS

    as
    1. Brueckner, Jan K, 1993. "Inter-store Externalities and Space Allocation in Shopping Centers," The Journal of Real Estate Finance and Economics, Springer, vol. 7(1), pages 5-16, July.
    2. Bebchuk, Lucian Ayre & Shavell, Steven, 1991. "Information and the Scope of Liability for Breach of Contract: The Rule of Hadley vs. Baxendale," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(2), pages 284-312, Fall.
    3. Hoon Cho & James D. Shilling, 2007. "Valuing Retail Shopping Center Lease Contracts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(4), pages 623-649, December.
    4. Thomas J Miceli & C. F Sirmans & Geoffrey K Turnbull, 2003. "Land Ownership Risk and Urban Development," Journal of Regional Science, Wiley Blackwell, vol. 43(1), pages 73-94.
    5. Hoy, Michael & Jimenez, Emmanuel, 1991. "Squatters' Rights and Urban Development: An Economic Perspective," Economica, London School of Economics and Political Science, vol. 58(229), pages 79-92, February.
    6. Miceli, Thomas J. & Sirmans, C. F., 1995. "Contracting with spatial externalities and agency problems The case of retail leases," Regional Science and Urban Economics, Elsevier, vol. 25(3), pages 355-372, June.
    7. Miceli, Thomas J. & Sirmans, C. F. & Turnbull, Geoffrey K., 2000. "The Dynamic Effects of Land Title Systems," Journal of Urban Economics, Elsevier, vol. 47(3), pages 370-389, May.
    8. de Meza, David & Gould, J R, 1992. "The Social Efficiency of Private Decisions to Enforce Property Rights," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 561-580, June.
    9. Matthew Baker & Thomas Miceli & C. F. Sirmans & Geoffrey K. Turnbull, 2001. "Property Rights by Squatting: Land Ownership Risk and Adverse Possession Statutes," Land Economics, University of Wisconsin Press, vol. 77(3), pages 360-370.
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    More about this item

    Keywords

    contracts; land development; leases; mitigation of damages;

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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