Commercial Lease Litigation: Lease Term Influences Landlord’s Damages Claim

In commercial real estate litigation, the lease provisions can influence claims for damages, as the Marol State, LLC v. Everlane, Inc., 2022 U.S. Dist. LEXIS 96180, case illustrates. When a lessee breaches a lease before the lease ends, the landlord might (a) treat the lease as terminated and take possession of the premises, (b) relet the premises and charge the breaching party the difference between the new rent it is able to obtain from a new tenant and the rental amount set forth in the breached lease, or (c) it can sue the breaching lessee for the amount of rent in the remaining term. But these are common law rules, not based on specific lease provisions.

In the Marol State case, the lease stated that:

Should landlord at any time terminate this lease for any breach, in addition to any other remedies it may have, it may recover from tenant all damages it may incur by reason of such breach, including … the worth at the time of such termination of the excess, if any, of the amount of rent reserved in this lease for remainder of the lease term over the then reasonable rental value of the premises for the remainder of the lease term.

The breaching tenant argued that a sale of the building after it breached took into account future rental income and therefore permitting the landlord to get the sale price for the building plus lost rent from it was a double recovery. The court held, however, that this provision doesn’t permit recovery of the entire future rent pursuant to the lease.  Instead, it allows recovery for the difference between the lease’s future rental income and the property’s reasonable rental value. The rental value of the property might have declined between the start of the lease and the later sale or the sale might have compensated the landlord for the full rental value. Summary judgment was refused for both parties until these facts were known.

For a copy of the case or information about your rights in commercial lease disputes, get in touch with Tom Patterson at or 312-750-1822.

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