Learning Outcomes
This article explains the termination of leasehold interests and related landlord–tenant remedies, including:
- The doctrinal foundations of early lease termination, distinguishing natural expiration from termination by surrender, abandonment, material breach, and anticipatory repudiation
- How a valid surrender is created, the role of landlord acceptance, and when conduct amounts to a surrender by operation of law sufficient to discharge future rent obligations
- How abandonment differs from surrender, what factual patterns signal abandonment on MBE questions, and how abandonment affects the tenant’s continuing liability for rent
- The modern majority rule imposing a landlord’s duty to mitigate damages, what counts as reasonable reletting efforts, and how courts calculate deficiencies after mitigation
- The concept of anticipatory breach in leases, including what language or conduct constitutes a clear repudiation, the landlord’s strategic options, and the limits on recovering future rent absent a valid acceleration clause
- The structure and regulation of security deposits, including permissible uses, “normal wear and tear,” itemized statements, statutory penalties, and the distinction between deposits and prepaid rent
- How these doctrines interact in integrated fact patterns—such as abandonment followed by reletting and application of the security deposit—so you can quickly identify majority and minority rules and compute exam-style damages.
MBE Syllabus
For the MBE, you are required to understand landlord–tenant termination rules with a focus on the following syllabus points:
- Creation and termination of leasehold interests
- Surrender and abandonment of leases, and their effect on rent obligations
- Landlord remedies after tenant breach, including duty to mitigate damages
- Anticipatory repudiation of leases and acceleration of rent
- Regulation and treatment of security deposits and “normal wear and tear”
- Allocation of rights and liabilities between original and new tenants after reletting
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
-
Which of the following is required for a valid surrender of a leasehold?
- Written notice only
- Landlord’s acceptance of the tenant’s offer to surrender
- Tenant’s unilateral abandonment
- Payment of all rent due
-
If a tenant abandons the premises before the lease ends, what is the landlord’s duty in most jurisdictions?
- Do nothing and collect full rent
- Immediately terminate the lease
- Make reasonable efforts to relet the premises
- Sue for specific performance
-
Which of the following best describes an anticipatory breach in the landlord-tenant context?
- Tenant’s failure to pay rent after moving out
- Tenant’s advance notice that they will not perform future lease obligations
- Landlord’s refusal to make repairs
- Tenant’s late payment of rent
-
In most states, what must a landlord do with a security deposit after a tenant vacates?
- Keep it as liquidated damages
- Return it in full, regardless of property condition
- Return it minus deductions for unpaid rent or damages, with an itemized statement
- Apply it only to future rent
Introduction
Termination of a tenant’s interest in real property can occur in several ways: by the natural expiration of the term, by valid notice in periodic tenancies, by material breach, by constructive eviction, or by mutual or unilateral actions that effectively end the relationship. For MBE purposes, questions often center on early termination before the stated end of the lease, especially where money is still owed and the parties disagree about their continuing obligations.
This article focuses on four closely linked doctrines the examiners like to combine in one fact pattern: surrender, abandonment and mitigation of damages, anticipatory breach, and security deposits.
Key Term: Surrender
The mutual agreement between landlord and tenant to terminate a lease before its natural expiration, ending both parties’ future obligations under the lease.Key Term: Abandonment
The tenant’s voluntary vacating of the premises without justification and without the landlord’s consent, coupled with nonpayment of rent and an apparent intent not to return.
Surrender of Leasehold
A lease may end before its stated term by surrender, which is a mutual agreement between landlord and tenant to terminate the lease early. The tenant offers to give up the lease; the landlord must accept that offer for surrender to be effective.
- Formality and Statute of Frauds
- If the original lease was for more than one year, most jurisdictions require an express surrender to be in writing to satisfy the Statute of Frauds.
- Oral surrenders of long-term leases are generally ineffective unless followed by conduct that creates a surrender by operation of law.
Key Term: Surrender by Operation of Law
An implied surrender inferred from the parties’ conduct that is inconsistent with the continuation of the lease, such as the landlord taking back exclusive possession and reletting for the landlord’s own benefit.
-
Express Surrender
- Typically accomplished by a written agreement stating that the lease is terminated as of a certain date.
- Terminates the tenant’s future obligation to pay rent, though the tenant remains liable for unpaid rent already accrued, absent an agreement to release those arrears.
-
Implied Surrender (Surrender by Operation of Law)
Surrender does not have to be express. It can be implied where the landlord’s conduct is inconsistent with the lease continuing, for example:- Accepting the keys and entering the premises to reconfigure the space for a different use
- Signing a new lease with someone else for a longer or different term that cannot coexist with the original lease
- Using the property for the landlord’s own exclusive purposes
By contrast, simply entering to inspect, make minor repairs, or show the unit to prospective tenants usually does not show acceptance of surrender; those actions can be consistent with mitigating damages while preserving the original lease.
Exam angle: The MBE often asks whether the landlord’s act of reletting is acceptance of surrender. Look for facts showing whether the landlord is acting on the tenant’s behalf (no surrender) or for the landlord’s own account (surrender).
Key Term: Holdover Tenant
A tenant who remains in possession after the lease term ends; the landlord may treat the tenant as a trespasser or as a tenant for a new term, depending on the jurisdiction and the landlord’s conduct.
Holdover situations are distinct from surrender. Once the term has naturally expired, surrender is no longer required to end the lease; the issue is whether a new tenancy has arisen.
Abandonment and Mitigation of Damages
If a tenant vacates the premises without the landlord’s consent and before the lease ends, and stops paying rent, this is abandonment.
At common law, a landlord could ignore abandonment, leave the premises vacant, and continue to collect rent as it became due. Modern law, and the rule typically applied on the MBE, imposes a duty to mitigate.
Key Term: Mitigation of Damages
The landlord’s duty to make reasonable efforts to reduce losses by attempting to relet the premises after a tenant’s breach or abandonment.Key Term: Duty to Mitigate
The obligation placed on the nonbreaching party—here, usually the landlord—to act reasonably to avoid unnecessary accumulation of damages after a breach.
-
Majority Rule (MBE Assumption)
In most jurisdictions, especially for residential leases and increasingly for commercial leases, the landlord must make reasonable efforts to relet the premises. If the landlord fails to mitigate, recoverable unpaid rent may be reduced or barred to the extent mitigation would have been possible. -
Minority Rule
A small minority still follow the older rule (mainly for commercial property) that the landlord has no duty to mitigate and may recover full rent as it accrues, even if the premises sit empty. Unless a question clearly tells you this rule applies, assume the landlord must mitigate. -
What Counts as Reasonable Efforts?
Courts look for steps comparable to what the landlord would do for any vacant unit, such as:- Advertising or listing the unit at a reasonable market rent
- Using brokers or agents the landlord normally uses
- Showing the premises to prospective tenants
- Not refusing reasonable replacement tenants or imposing unusual conditions
The landlord need not:
- Accept an unqualified or inappropriate tenant
- Accept a substantially below-market rent
- Favor the defaulting tenant’s unit over other vacancies
-
Landlord’s Options After Abandonment (Majority View)
When a tenant abandons, the landlord generally has three choices:-
Accept Surrender
- Treat the lease as terminated.
- Tenant’s future rent obligations end; tenant remains liable for past due rent and possibly for reasonable costs directly caused by the breach (e.g., advertising, reletting costs), depending on the agreement.
-
Relet on Tenant’s Account (No Surrender)
- Relet while keeping the original lease in force.
- Old tenant remains liable for the deficiency between the original rent and the new rent plus reasonable reletting expenses.
- Landlord must credit the tenant with any rent actually collected.
-
Do Nothing and Sue for Rent as it Accrues
- Still theoretically possible in minority jurisdictions that reject a duty to mitigate, but on the MBE you should usually assume this is not allowed.
-
Key Term: Acceleration Clause
A lease provision allowing the landlord, upon tenant default, to declare all future rent due immediately.
Acceleration clauses change the damages calculation after breach or abandonment. Even with acceleration, many courts still require reasonable mitigation, crediting the tenant for any rent obtained from reletting.
Worked Example 1.1
A tenant signs a one-year lease but moves out after four months, leaving the keys on the kitchen counter. The landlord enters, repaints, and advertises the apartment but does not find a new tenant for three months. The landlord sues the original tenant for rent.
Answer:
This is abandonment. The landlord has a duty to mitigate by making reasonable efforts to relet. Repainting and advertising are steps toward mitigation. If the landlord can show those efforts were reasonable, the tenant remains liable for rent during the three-month vacancy, minus any rent actually received from a replacement tenant. The tenant is not liable for rent after the landlord accepts a full surrender or the lease term naturally expires.
Anticipatory Breach
An anticipatory breach (anticipatory repudiation) occurs when a tenant clearly communicates, before performance is due, that they will not fulfill future lease obligations.
Key Term: Anticipatory Breach
A clear and unequivocal statement or act by a tenant indicating they will not perform future obligations under the lease, allowing the landlord to treat the lease as breached.
Not every expression of concern is enough. “I am having trouble paying rent” is not repudiation. “I will not pay rent for the remaining six months” is.
-
Landlord’s Options on Anticipatory Breach
Assuming a clear repudiation:- Treat the repudiation as an immediate breach, retake possession (subject to any applicable notice requirements), and seek damages; or
- Ignore the repudiation, keep the lease alive, and sue for rent as it comes due.
-
Can the Landlord Sue Now for All Future Rent?
Unlike in ordinary contract cases, many jurisdictions do not allow a landlord to sue immediately for all future rent upon anticipatory breach unless:- The lease contains a valid acceleration clause; or
- A statute allows recovery of the present value of future rent less the fair market rental value (subject to mitigation).
The safer MBE assumption—consistent with the existing majority-language—is that the landlord cannot recover all future rent at once unless the lease expressly provides for acceleration or the question clearly states that the jurisdiction allows such recovery.
-
Retraction of Repudiation
The tenant may retract the repudiation before:- The landlord materially changes position in reliance (e.g., signs a new lease with another tenant), or
- The landlord indicates acceptance of the repudiation (e.g., accepts surrender and terminates the lease).
After a valid retraction, the lease is back on foot, subject to any prior breaches.
Worked Example 1.2
A tenant emails the landlord stating, “I will not pay rent for the remaining six months of my lease.” The landlord immediately sues for all future rent.
Answer:
This is an anticipatory breach. However, in most states, the landlord cannot immediately recover all future rent unless the lease includes an enforceable acceleration clause or a statute so provides. The landlord can terminate the lease, mitigate by reletting, and then recover unpaid past rent plus the difference between the contract rent and the rent actually obtained (or reasonably obtainable) from a new tenant.
Security Deposits
Landlords commonly require a security deposit to secure performance of lease obligations.
Key Term: Security Deposit
Money paid by the tenant at the start of the lease to secure performance of lease obligations, refundable at the end of the tenancy subject to deductions for unpaid rent or damage beyond normal wear and tear.Key Term: Normal Wear and Tear
Deterioration that occurs through ordinary, reasonable use of the premises by the tenant—not involving negligence, abuse, or misuse.
Most states regulate security deposits in detail. The MBE will not test precise deadlines, but you must know the general pattern:
-
During the Tenancy
- The deposit usually must be held in a separate account and not treated as the landlord’s own money.
- Some states require interest to be paid to the tenant.
-
After the Tenant Vacates
In most states, the landlord must:- Inspect the premises within a set period
- Apply the deposit only to:
- Unpaid rent
- Costs of repairing damage beyond normal wear and tear
- Sometimes reasonable cleaning to restore the unit to its initial condition
- Return any remaining deposit with an itemized statement of deductions within a statutory time (often 14–30 days)
Key Term: Itemized Statement
A written list specifying each deduction from the security deposit, including the nature of the damage or charge and the amount allocated.
-
Consequences of Noncompliance
Many statutes penalize landlords who wrongfully withhold deposits or fail to provide an itemized statement, sometimes by:- Forfeiting the right to keep any portion of the deposit
- Imposing double or treble damages and attorney’s fees
-
“Last Month’s Rent” vs Security Deposit
Money expressly labeled and used as prepaid last month’s rent is not a security deposit and need not be returned if rent was owed for that month. The MBE sometimes tests this distinction.
Worked Example 1.3
After a tenant vacates, the landlord finds damage to the walls and unpaid rent. The landlord deducts these amounts from the security deposit and returns the remainder with an itemized statement within the statutory deadline.
Answer:
The landlord has complied with most state laws by limiting deductions to unpaid rent and damage beyond normal wear and tear and by providing an itemized statement and timely refunding the balance. Failure to provide the itemization or to refund the balance on time may result in penalties or forfeiture of the right to retain any part of the deposit.
Worked Example 1.4
A tenant lives in an apartment for five years. The carpet is worn, and the paint is slightly faded, but there are no holes or stains. The landlord keeps the entire security deposit to pay for new carpet and repainting and provides an itemized statement listing these items.
Answer:
Ordinary carpet wear and faded paint after five years are classic examples of normal wear and tear. The landlord may not charge the tenant for restoring the unit to “like new” condition. On MBE facts like this, retaining the deposit is wrongful; many statutes would require full refund and may impose penalties.
Interactions: Abandonment, Mitigation, and Security Deposits
When a tenant abandons, the landlord commonly applies the security deposit to unpaid rent and damage. That application does not automatically terminate the lease or bar further recovery; absent a clear agreement that the deposit serves as liquidated damages, the landlord may still seek additional damages, subject to the duty to mitigate.
Worked Example 1.5
A tenant abandons six months into a one-year lease, owing one month of back rent. The tenant’s security deposit equals one month’s rent. The landlord keeps the deposit, does nothing to relet, and sues for the remaining five months’ rent.
Answer:
Keeping the deposit to cover the unpaid month was permissible, but the landlord still has a duty to make reasonable efforts to relet and mitigate damages. Simply doing nothing while the unit remains vacant breaches that duty. The landlord’s recovery for the remaining months will be reduced or barred to the extent reasonable mitigation would have avoided the loss.
Worked Example 1.6
A tenant with eight months left on a commercial lease writes: “Due to restructuring, we hereby terminate our lease effective next month. We will vacate then and will not pay rent thereafter.” The lease contains an acceleration clause. The landlord quickly relets the space for the same rent, starting two months after the tenant leaves.
Answer:
The tenant’s letter is an anticipatory breach. The acceleration clause allows the landlord to declare the remaining rent immediately due, but the landlord must still mitigate and credit the tenant with rent obtained from the replacement tenant. The tenant is liable for the one gap month plus any reasonable expenses of reletting; there is no liability for months when the premises are relet at the same rent.
Exam Warning
Many students confuse surrender (which requires landlord acceptance) with abandonment (which does not). If the landlord does not accept surrender, the tenant remains liable for rent, subject to the landlord’s duty to mitigate. Carefully distinguish a landlord’s actions taken to mitigate from actions that show an intent to terminate the lease.
Revision Tip
Always check whether the landlord has made reasonable efforts to relet after abandonment. On the MBE, assume the majority rule—that a duty to mitigate applies—unless the question states otherwise or clearly indicates an older common-law rule.
Key Point Checklist
This article has covered the following key knowledge points:
- Surrender ends the lease early only if the landlord accepts the tenant’s offer; for long leases, express surrender usually must be in writing.
- Surrender may be implied (surrender by operation of law) where the landlord’s conduct is inconsistent with the lease continuing (e.g., reletting for the landlord’s own account).
- Abandonment occurs when the tenant vacates without justification and stops paying rent; that alone does not terminate the lease.
- Under the majority rule (assumed on the MBE), landlords must mitigate damages by making reasonable efforts to relet after abandonment; failure to mitigate limits recovery.
- When reletting, a landlord may either accept surrender (terminating future rent) or relet on the tenant’s account (preserving the tenant’s liability for deficiencies).
- Anticipatory breach requires a clear and unequivocal repudiation of future lease obligations; vague statements about financial trouble are not enough.
- Most jurisdictions do not allow immediate recovery of all future rent upon anticipatory breach unless the lease includes an acceleration clause or a statute so provides.
- Security deposits secure performance; they may be applied only to unpaid rent and damage beyond normal wear and tear and must be accounted for with an itemized statement.
- Ordinary wear and tear (worn carpet, minor scuffs) cannot be charged to the tenant; charging for these items or failing to itemize may lead to forfeiture of the landlord’s right to keep the deposit and statutory penalties.
- Application of the security deposit does not, by itself, terminate the lease or bar additional damages; the landlord’s recovery remains subject to mitigation.
Key Terms and Concepts
- Surrender
- Surrender by Operation of Law
- Abandonment
- Mitigation of Damages
- Duty to Mitigate
- Anticipatory Breach
- Acceleration Clause
- Security Deposit
- Normal Wear and Tear
- Itemized Statement
- Holdover Tenant