Background
Turbo Restaurants operated an Arby’s franchise at 900 South Jackson Road in McAllen under a long-term lease. When 900 S. Jackson, LLC purchased the property in December 2021, it assumed Turbo’s lease, which ran through November 2033. Beginning in 2023, 900 claimed Turbo breached the lease by failing to operate as an Arby’s, maintaining the property, and timely paying rent. On April 26, 2023, 900 sent a default notice; on June 20, 2023, it terminated the lease and excluded Turbo from the premises.
Before receiving the termination notice, Turbo had attempted to find a replacement tenant and presented 900 with a November 2023 letter identifying multiple qualified candidates offering higher rental rates than the original lease. 900 rejected these options and instead signed a new fifteen-year lease with Valvoline on January 31, 2024, with a rent commencement date of August 1, 2025—more than seven months later and nearly fourteen months after terminating Turbo’s lease.
900 sued for breach on August 19, 2024, claiming $470,379 in damages including lost rent, broker fees, and increased interest on its loan. The trial court granted 900’s motion for summary judgment on September 22, 2025, awarding the full amount. Turbo appealed, arguing 900 failed to mitigate its damages.
The Court’s Holding
The court reversed as to damages and remanded for trial, holding that Turbo raised a genuine issue of material fact regarding whether 900 failed to reasonably mitigate. Texas Property Code § 91.006 imposes a non-waivable statutory duty on landlords to mitigate damages when a tenant abandons the premises. A landlord must use “objectively reasonable efforts” to re-lease to a tenant “suitable under the circumstances,” and the reasonableness of those efforts is a question for the fact finder, not a matter within the landlord’s unfettered discretion.
The court found sufficient evidence of potentially inadequate mitigation efforts: Turbo presented at least four alternative tenants by November 2023 willing to pay higher rent than Valvoline; 900 delayed seven months between terminating Turbo and executing the Valvoline lease; and 900 did not collect rent until August 2025. The court rejected 900’s argument that it had contractual discretion to reject Turbo’s proposed tenants, emphasizing that landlords cannot contract out of their statutory mitigation duty. Although Turbo did not prove an exact damages reduction figure, the court held that evidence of unreasonable delay, rejection of qualified replacement tenants, and acceptance of lower rent sufficed to create a fact issue precluding summary judgment.
The court also rejected 900’s contention that its standard business practices justified the fourteen-month delay in collecting rent, finding these issues similarly appropriate for jury determination.
Key Takeaways
- Landlords owe a non-waivable statutory duty to mitigate damages upon tenant abandonment under Texas Property Code § 91.006, which cannot be eliminated or modified by lease language.
- Tenants can survive summary judgment on a mitigation defense without proving a precise damages reduction; evidence of unreasonable delays, rejection of qualified replacement tenants, or acceptance of below-market rent raises a triable issue.
- Lease provisions granting a landlord “total discretion” in selecting a replacement tenant do not relieve the landlord of its statutory obligation to use objectively reasonable efforts to mitigate.
- The reasonableness of a landlord’s mitigation efforts—including decisions to reject specific tenants or delay in execution of a new lease—is a question of fact for the jury, not for the trial court to resolve on summary judgment.
Why It Matters
This decision provides important protection for defaulting tenants in Texas and clarifies the scope of landlords’ mitigation obligations. Despite a landlord’s contractual right to select replacement tenants, the court makes clear that landlords cannot use broad discretionary language to sidestep the statutory duty to mitigate. The ruling means landlords must act promptly and reasonably in seeking replacement tenants and cannot reject otherwise qualified candidates without sound business justification. Tenants can now challenge damages awards by pointing to unreasonable delays, suspicious rejection of qualified candidates, or acceptance of below-market rent—without needing to prove the exact dollar amount of avoidable damages.
The decision also reinforces that summary judgment is inappropriate when material disputes exist regarding whether a party exercised reasonable efforts. Here, 900’s seven-month delay in executing a new lease, rejection of better-paying tenants, and vague justifications based on “longer lease term” preference created factual questions unsuitable for resolution without a jury trial.