How Much of Replacement Tenant’s Rent Must Landlord Offset Against Original Tenant’s Debt?

What Happened: An auto detailing tenant acknowledged installing a parking lot area without the landlord’s authorization and then vacating with 19 months remaining on the lease. The question: How much, if any, of the rent the landlord received from the new tenant should be offset against the previous tenant’s debts? The court turned to the following lease language:

Upon reletting without termination, all rentals received by Landlord from such reletting shall be applied first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees and attorneys’ fees and costs of such alterations and repairs; third, to the payment of rent due and payable hereunder; and the residue, if any, shall be held by Landlord and applied to the payment of future rents as the same may become due and payable hereunder.  

The court decided on an offset of $41,250, the amount the landlord received in rent from the new tenant up to the date the original lease was due to expire. It then awarded the landlord $72,037.12 in damages, including unpaid rent, the $21,137.50 the landlord spent to alter the loading dock to accommodate the new tenant, and the $9,800 it shelled out to restore the landscaping the previous tenant had removed without authorization. The tenant appealed.

Decision: The Missouri appeals court upheld the lower court’s ruling.

Reasoning: The tenant made three arguments, all of which the court rejected:

• The argument that the “all rentals” language of the above clause meant that the offset should be based on total rent the landlord received from the second tenant for the entire second lease term ignored the fact that the lease ran for a fixed term and was scheduled to expire on a definite date and there was no intention for the offset liability to run beyond that term;  
• The 40 feet x 60 feet concrete parking pad the tenant installed without authorization was a clearly substantial change requiring the landlord’s consent under the lease; and  
• The “costs and expenses of reletting” language clearly did include the $21,137 the landlord spent to alter the loading dock for the new tenant.

• TCN Invs., LLC v. Superior Detail, 2019 Mo. App. LEXIS 1938, 2019 WL 6703268