According to Braswell V. Shurling, 1953, it does. Even if it is mutually agreed to in the termination settlement that the tenant owes the rent for the remainder of the term, the landlord must offset the amount due to the amount of the difference between what the property yields under a subsequent tenant. Technically, a landlord could simply do nothing—not market the property at all for the remaining term. But I don’t think this tactic would be favorably viewed by a court of law.
I think the operative issue here is that the landlord be made whole under the initial lease terms. So, for example, if the landlord sold the property to a buyer that wanted to occupy the premises, rents due under the termination agreement should cease, because the owner no longer has a liability to be offset by rent. In another instance, if the property were sold to a subsequent investor, the seller (original landlord) might justifiably argue that the original lease and any modification of it would transfer to the new owner upon closing, because the liability is assumed by the buyer. In such case, the new owner would be entitled to any terms agreed to in the original lease and termination agreement so the tenant would remain obligated.
In practicality, we often chose to work with tenants that are early terminating. If they help us by cooperating during the final few months to market and show the property, we minimize the penalty and administrative charges for early termination. I think it is both bad business practice and morally corrupt to attempt to “make money” off of such circumstances. I believe that most courts would agree with that perspective. We attempt to simply keep the owner whole in the process.
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The author of this Blog is neither an attorney nor an accountant. Nothing written should be construed as legal advice. Conclusions conveyed are outcomes based upon practical experience and should not be depended upon to be a common outcome of other similar circumstances. Consult with a professional before making tax or legal decisions about real estate in Roswell, Milton, Johns Creek, Alpharetta, Woodstock or any other Georgia municipality.
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