Breaking a Lease — Damages & Mitigation (Civil Code §§ 1951.2, 1951.4)

When a tenant breaches a lease of real property and abandons it before the term ends — or the landlord terminates the tenant's right to possession because of the breach — Civil Code § 1951.2 sets out what the landlord may recover once the lease is terminated. A different statute, § 1951.4, gives the landlord an alternative: leave the lease in effect and continue collecting rent as it becomes due, rather than terminating and suing for damages.

Which path applies, and what a landlord can actually collect, depends on the specific lease terms and on whether the landlord acted reasonably to reduce the loss. GoCodebook can walk through either statute's conditions against the facts of a specific lease.

Once a breach-and-abandonment terminates the lease, § 1951.2(a) lets the landlord recover, from the tenant: (1) the worth, at the time of award, of unpaid rent already earned before termination; (2) the worth of unpaid rent that would have been earned between termination and the time of award, minus whatever rental loss the tenant proves could reasonably have been avoided; (3) (subject to subdivision (c)) the worth of unpaid rent for the remainder of the lease term after the time of award, again minus avoidable loss; and (4) any other amount necessary to compensate the landlord for detriment proximately caused by the tenant's failure to perform, or that would ordinarily result from it.

The "worth at the time of award" for the first two categories is computed with interest at the rate specified in the lease, or the legal rate if none is specified. For the third category — rent for the remaining term after the award — the statute requires discounting at the Federal Reserve Bank of San Francisco's discount rate plus 1 percent.

Under § 1951.2(c), the landlord may recover damages for the remaining term after the award (category 3, above) only if: (1) the lease itself provides that recoverable damages include that future-rent measure, or a shorter specified period; or (2) the landlord relet the property before the award and proves the reletting was done reasonably and in a good-faith effort to mitigate damages — subject to any limitations the lease specifies. Efforts by the landlord to mitigate damages caused by the breach do not waive the landlord's right to recover damages under the section.

Section 1951.2 does not affect a landlord's separate right, if the lease provides for it, to indemnification for personal-injury or property-damage liability arising before the lease terminated.

This remedy is available only if the lease itself provides for it — the statute gives model language that satisfies this requirement. Where the lease qualifies, even after the tenant breaches and abandons the property, the lease continues in effect for as long as the landlord does not terminate the tenant's right to possession, and the landlord may enforce all rights and remedies under the lease — including collecting rent as it becomes due — if any of three conditions is met: the lease permits the tenant to sublet or assign without restriction; the lease permits subletting or assignment subject to reasonable standards fixed at the time the lease was signed; or the lease permits subletting or assignment with the landlord's consent, and the lease either says consent will not be unreasonably withheld or the law implies that standard.

Certain landlord actions do not count as terminating the tenant's right to possession for this purpose: acts of maintenance or preservation, or efforts to relet the property; appointment of a receiver at the landlord's initiative to protect the landlord's interest; and withholding consent to (or terminating) a subletting or assignment, so long as doing so does not violate the tenant's rights described above.