Background
The landlord, Shea & 92nd OPCO, LLC, leased a commercial restaurant space to Streets of New York, Inc. under a written lease agreement. In April 2022, the tenant breached the lease by abandoning the space and ceasing rent payments. The landlord retook possession and relet the premises (combined with an adjacent space) to a replacement tenant on July 6, 2022. The new lease deferred rent payments until April 2023 and included a $155,975 reimbursement to the replacement tenant for improvements. The original rent was $9,599.54 per month; the new lease specified $16,156 per month for the larger space.
In 2024, the landlord sued for breach of contract, seeking $168,033.11 in damages for lost rent and expenses from April 2022 through April 2023. The tenant argued that its obligation to pay rent ended when the landlord relet the premises in July 2022. The superior court granted summary judgment for the landlord, and the tenant appealed.
The Court’s Holding
The Arizona Court of Appeals affirmed summary judgment for the landlord. The court held that the lease agreement expressly permitted the landlord to recover damages for breach, including rent owed through the end of the lease term, reduced by any rent the landlord received from a replacement tenant. The lease language specifically contemplated reletting and allowed the landlord to recover both reletting expenses and future rent.
The court rejected the tenant’s reliance on the common law rule from Roosen v. Schaffer, which limited landlord recovery to unpaid rent prior to lease termination. The court explained that while Roosen stated the common law default, parties may contractually modify those rights—which is precisely what the landlord and tenant did in their lease agreement. The lease provisions were sufficiently clear to override common law and control the remedies available for breach.
The court also rejected the tenant’s windfall argument. Although the replacement tenant made $155,975 in improvements, the landlord was contractually obligated to reimburse those costs, resulting in no net benefit. The court further noted that the replacement lease covered a larger space and at no point did the tenant offer evidence that the landlord failed to act reasonably in reletting the property.
Key Takeaways
- Parties may contractually modify common law rules governing landlord remedies after tenant breach, and courts will enforce lease language as written rather than apply default common law limitations.
- A lease provision allowing recovery of rent through the end of the lease term remains enforceable even after the landlord has relet the premises, provided the lease expressly contemplates reletting and allows an offset for rent actually received.
- The breaching tenant bears the burden of proving that the landlord failed to mitigate damages or act reasonably; absent such evidence, the court will enforce the lease remedy provisions according to their terms.
Why It Matters
This decision reinforces that commercial landlords can contractually secure strong protections by including explicit language in their leases addressing remedies for breach, including the right to collect rent through the end of the lease term after reletting. Landlords need not rely solely on common law default rules. The decision also clarifies that courts will enforce such lease provisions even when they diverge from traditional common law remedies, provided the language is sufficiently clear and specific.
For tenants, the decision underscores the importance of carefully negotiating lease remedy provisions and the practical significance of common law protections only applying when parties have not agreed otherwise. The decision will likely encourage commercial property owners to include detailed remedies language in leases, and validates that courts will hold breaching tenants accountable under the full scope of contractually agreed remedies.