Key Takeaways

• When a commercial tenant defaults or abandons the space, California law gives the landlord several remedies, but each comes with conditions.
• The landlord can terminate the lease and sue for damages, including unpaid rent and future rent reduced to present value.
• Future-rent damages are recoverable only if the landlord made a good-faith effort to mitigate, the duty to re-let reduces what the tenant owes.
• A landlord can instead keep the lease alive and collect rent as it comes due, but only if the lease expressly reserves that remedy and lets the tenant assign or sublet.
• Self-help, locking the tenant out, is not the path; remedies run through the lease, the statute, and the courts.

When a Commercial Tenant Breaks the Lease: A California Landlord’s Remedies

A commercial tenant who stops paying rent or walks away mid-term leaves the landlord with a problem and a set of choices. California law gives commercial landlords meaningful remedies, more than residential landlords have in some respects, because commercial tenancies are largely freedom-of-contract. But each remedy comes with conditions, and a misstep, especially resorting to self-help, can turn the landlord’s strong position into a liability. Here is how a California landlord’s remedies work when a commercial tenant breaches, explained for landlords weighing their options and for tenants who want to understand their exposure.

Start with the lease

Before the statute, look at the lease. Most commercial leases spell out what counts as a default (nonpayment, unauthorized transfer, other covenant breaches), any cure periods, and the landlord’s remedies on default. Those provisions usually track or expand on California’s statutory remedies, and the landlord must follow them, including honoring any cure period, before acting. The lease is the first source of the landlord’s rights and the first place a court will look.

Remedy 1: Terminate the lease and recover damages

The most common remedy is to terminate the tenant’s right to possession and sue for damages. Under California law, those damages are designed to put the landlord in roughly the position it would have occupied had the lease been performed, and generally include:

• Unpaid rent that accrued up to the time of termination;
• Rent that accrues after termination until the time of award; and
• The “worth at the time of award” of the rent for the balance of the term, that is, the future rent the tenant would have owed, reduced to present value.

There is a crucial limit on that future-rent figure: it is reduced by the amount the tenant proves the landlord could have reasonably avoided. This is the duty to mitigate, and it is central. California law allows a landlord to recover future-rent damages only where the landlord acted reasonably and in good faith to reduce the loss, typically by making genuine efforts to re-let the space. A landlord who simply sits on an empty space and lets the meter run, making no effort to re-let, risks having the recoverable damages cut down accordingly.

For tenants, this is the reassuring counterweight to the “you owe all the remaining rent” fear: you generally do not owe rent the landlord could reasonably have recovered by re-letting. For landlords, the lesson is to document re-letting efforts, the duty to mitigate is not optional, and good records of marketing the space are what support a future-rent claim.

Remedy 2: Keep the lease alive and collect rent as it comes due

California also offers landlords a different path: rather than terminating, the landlord can keep the lease in effect even after the tenant abandons, and continue to sue for rent as it becomes due. This can be attractive when re-letting is difficult, it lets the landlord hold the tenant to the bargain over time.

But this remedy is not automatic, and this is a frequent point of confusion. Under California law, a landlord can use the continue-the-lease remedy only if two conditions are met: the lease expressly provides for this remedy (it must be reserved in the lease language), and the tenant has the right to assign or sublet, subject only to reasonable limitations. If the lease does not reserve this remedy, the landlord cannot rely on it, the default expectation is that the landlord terminates and sues for damages (Remedy 1), subject to the duty to mitigate. Acts like maintaining the property or trying to re-let do not, by themselves, count as terminating the tenant’s right to possession, so a landlord can preserve this option while still protecting the space, if the lease reserved it in the first place.

Choosing between the remedies

When both paths are available, the choice between terminating and suing for damages (Remedy 1) and keeping the lease alive (Remedy 2) is a practical judgment that turns on the market and the lease. Terminating and re-letting usually makes sense when the space will lease again readily: the landlord cuts losses, brings in a new paying tenant, and pursues the former tenant for the shortfall, all consistent with the duty to mitigate. Keeping the lease alive can be more attractive when re-letting is hard, when demand is soft or the space is unusual, because it lets the landlord hold the tenant to the rent over time rather than absorbing a long vacancy, but again, only if the lease reserved that remedy.

The catch is that the choice is constrained by decisions made long before the default, at lease signing. A landlord who wants the continue-the-lease option available must have reserved it in the lease language and allowed the tenant to assign or sublet; a landlord who did not is effectively limited to terminate-and-mitigate. That is why the remedies provisions are worth getting right when the lease is drafted, not discovered when a tenant walks. For tenants, the same drafting determines exposure: a lease that reserves the continue-the-lease remedy and limits assignment can leave a departing tenant on the hook longer. Either way, the default is rarely the moment to first read these clauses, by then the options are set. Because the right choice depends on the specific lease and the specific market, it is a decision worth making with advice rather than reflex.

Handling an abandoned space

When a tenant appears to have abandoned the premises, the landlord faces a practical question: can I retake the space? California provides a procedure for treating a commercial space as abandoned and re-entering after proper notice, but it must be followed carefully. Acting on a mistaken assumption that the tenant abandoned, when they had not, can expose the landlord to a wrongful-eviction claim. When abandonment is unclear, the safer course is to use the proper notice procedure or the unlawful detainer process rather than simply changing the locks.

What a landlord should not do: self-help

This is the most important caution for landlords. However clear the tenant’s breach, self-help eviction, changing the locks, removing the tenant’s property, cutting off utilities to force the tenant out, is not the lawful remedy and can expose the landlord to significant liability. California’s remedies run through the lease, the statute, and, where possession is disputed, the courts and the sheriff. A landlord with a strong case can undermine it badly by taking matters into its own hands. The disciplined path, proper notice, the unlawful detainer process where needed, and documented mitigation, is both the lawful one and the one most likely to succeed.

Where a personal guarantee fits

If an owner personally guaranteed the lease, the landlord’s remedies may extend to that guarantor for amounts the business does not pay. That can significantly strengthen the landlord’s position and, correspondingly, raise the stakes for the individual who signed. Both sides should understand whether a guarantee is in play, because it changes the practical calculus of any default and any negotiated resolution.

Because these remedies carry conditions, and missteps carry liability, this is an area where getting advice before acting protects both sides. Bay Legal advises California landlords on commercial lease defaults and helps tenants understand and resolve their exposure. For guidance on your specific situation, call (650) 668-8000 or schedule a consultation at baylegal.com/contact.

The bottom line

When a commercial tenant breaks the lease, a California landlord can generally terminate and sue for damages, including future rent reduced to present value, but only as reduced by the duty to mitigate, or keep the lease alive and collect rent as it comes due, but only if the lease expressly reserved that remedy and the tenant may assign or sublet. An apparently abandoned space must be handled through the proper procedure, and self-help is never the answer. Start with the lease, follow the statute, document mitigation, and, given the conditions and the stakes, get advice before acting.

Dealing with a commercial tenant default? For guidance on your specific situation, call (650) 668-8000 or schedule a consultation at baylegal.com/contact.

Frequently Asked Questions

What can a California landlord do when a commercial tenant breaks the lease?

The landlord can generally terminate the lease and sue for damages (including unpaid rent and future rent reduced to present value), or, if the lease allows, keep the lease in effect and collect rent as it comes due. The lease itself defines the default and remedies, and the landlord must follow it, including any cure period, before acting.

Does a California landlord have to try to re-rent the space?

Yes. California imposes a duty to mitigate. A landlord can recover future-rent damages only by acting reasonably and in good faith to reduce the loss, typically by making genuine efforts to re-let. The damages the tenant owes are reduced by what the landlord could reasonably have recovered through re-letting, so a landlord cannot simply leave the space empty and bill the tenant for everything.

Can a landlord keep the lease going and just collect rent after a tenant leaves?

Only under specific conditions. California allows a landlord to continue the lease and collect rent as it comes due only if the lease expressly reserves that remedy and the tenant has the right to assign or sublet, subject to reasonable limits. If the lease does not reserve it, the landlord’s path is to terminate and sue for damages, subject to the duty to mitigate.

What should a landlord do if a commercial tenant abandons the space?

Follow the proper procedure rather than assuming. California provides a process for treating a space as abandoned and re-entering after proper notice, but acting on a mistaken belief that the tenant abandoned can lead to a wrongful-eviction claim. When abandonment is unclear, using the notice procedure or the unlawful detainer process is safer than changing the locks.

Can a commercial landlord change the locks on a defaulting tenant?

No. Self-help measures like changing the locks, removing property, or shutting off utilities to force a tenant out are not lawful remedies and can expose the landlord to significant liability, even where the tenant is clearly in breach. Remedies run through the lease, the statute, and the courts, with any physical removal carried out by the sheriff under a court order.