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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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    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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