Mitigation & The Landlord
Many property management pros are familiar with the term “mitigation”. As noted in Arizona Residential Landlord and Tenant Act, (ARLTA) and also throughout case law that interprets landlord-tenant issues:
A.R.S. 33-1305: Administration or remedies; enforcement
A. The remedies provided by this chapter shall be so administered that the aggrieved party may recover appropriate damages. The aggrieved party has a duty to mitigate damages.
Mitigation is a legal term that has always been an integral part of contract law. It means that you, as a landlord, have to take all “reasonable” steps to reduce, limit or minimize your damages. This usually occurs in the following set of examples.
The first is during the tenancy or lease term. For example, the plumbing goes out in the tenant’s apartment at about the same time their rent is due. Now, the tenant refuses to pay rent because management has yet to correct the problem. As landlord, you could not legally refuse to fix the plumbing. And, the tenant could not legally refuse to pay the rent until the problem is fixed. Legally, a landlord must take all reasonable efforts to make repairs thereby “mitigating’ their damages…i.e.,not obtaining the rent by not fixing the problem.
The second condition involves renters who breaches their lease. A resident vacates the unit at the end of their lease term. It could be an eviction, a
situation where the tenant can no longer afford the rent and moves out before any court action begins, or a renter illegally terminates the lease by not giving proper notice. Nonetheless, the landlord now has a empty unit.
Arizona law requires the landlord to now use all reasonable steps to re-lease the unit since the renter remains responsible until the lease ends or a new tenant enters into a new lease for the unit. This means the landlord must do what it normally would to rent this unit. This includes putting up a “For Rent” signs, running ads in the local paper, and showing the vacant apartment to prospective renters by letting them know it is available.
The problem for management occurs when the resident alleges the landlord did not take reasonable steps to re-rent the apartment. For example, a former tenant may instruct someone to either visit the unit or have someone inquire on its availability to see if the landlord offers the unit as being available. Then, the former tenant may demand, if a court action were filed, to see ads and records on how the landlord promoted the unit. Remember, the burden to prove reasonable marketing rests on the landlord or his management company, so keep good records.
Note that the law only requires a reasonable effort to mitigate, not efforts beyond all norms. Additionally, in the event a property re-rents for less than the previous rent, a landlord may be able to seek damages for loss of income that will be incurred in the new lease.