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Lease Defaults and the Efficient Mitigation of Damages

  • Thomas J. Miceli

    (University of Connecticut)

  • C. F. Sirmans

    (Florida State University)

  • Geoffrey K. Turnbull

    (Georgia State University)

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.

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File URL: http://web2.uconn.edu/economics/working/2009-07.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2009-07.

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Date of creation: Jan 2009
Date of revision:
Handle: RePEc:uct:uconnp:2009-07
Note: We acknowledge the helpful comments of Matthew Kahn and two reviewers.
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