International Trust Co. v. Weeks

Background

A trust company owned a building and leased the first floor and basement to a national bank for use as its business offices. The bank became insolvent, a receiver briefly occupied the space, and an agent for the bank's shareholders continued occupying the premises until May 1900. The trust company retook possession shortly after the bank's insolvency. The lease contained a clause saying the owner could reenter and, at its discretion, relet at the tenant’s risk, crediting only amounts actually collected. The bank’s agent sued for unpaid rent, arguing the owner had a duty to try to relet and had failed to do so.

Reasoning

The Court addressed whether the owner could rely on the lease clause without trying to relet the space. Looking to Massachusetts authority and the trial record, the Court agreed that a lessor who elects to reenter cannot simply refuse to relet; instead the owner must make an honest and reasonable attempt to find a new tenant. Whether that effort occurred was a question for the jury, which found the trust company did not make a reasonable effort. The Court affirmed the lower courts’ judgments that protected the bank’s agent from full rent liability.

Real world impact

The ruling means landlords who retake leased commercial property cannot automatically shift the rent risk to insolvent tenants without actually trying to relet. Commercial landlords and tenants should expect courts to require reasonable, honest efforts to find replacement renters before holding tenants responsible for lost rent. This decision applies to the facts and Massachusetts practice considered by the Court.