Q. I rent out an apartment. A prospective tenant gave me a deposit, but then cancelled. He gets the deposit back if I find a new tenant. Do I have to look for a new tenant, or can I just pocket the deposit?
A. Your question deals with a concept known in secular law as "mitigation". When one party is liable for loss caused to another, typically the person suffering the loss has an obligation to mitigate the damage before holding the other responsible. When someone cancels a rental agreement on short notice, he causes you a loss because if he hadn't grabbed the apartment you would have found someone else. The question is if now you have the obligation to make an effort to find someone else.
I am sure that different jurisdictions have differing laws on this topic; my column is not meant to give legal guidance but rather ethical guidance based on the principles of Jewish law and tradition.
We find in many cases that Jewish law obligates a measure of mitigation. Here are some examples:
If an employer has to suddenly cancel a hire, and the employee is stuck without work for that day (or week, or month) then the employee is entitled to compensation. However, the employee is obligated to make an effort to find alternative work; only if he is unable is he entitled to compensation. Likewise, if the worker suddenly leaves the employer in the lurch, the employer can make the employee liable for a loss, but only if he cannot find alternative workers for comparable pay. (1)
Here is a parallel situation:
The rabbis taught: if someone hires a ship but unloads in the middle of the way, he has to pay half the rental and the owner has [no monetary claim but] only resentment against him. What is the case? If the owner is able to find someone else, then why is he resentful? And if he is unable to find someone else, he is liable for the entire amount! Even if he is able to find someone else, he is resentful because of the extra strain on the ship [from loading and unloading]. (2)
Once we acknowledge the need for mitigation, we still need to ask who has the responsibility, and the right, of mitigation. We could imagine in the above cases that the worker doesn't have to seek alternative employment, but that the employer is empowered to look on his behalf. Or that the employer doesn't have to look for replacement workers, but the quitting workers are empowered to give him some. In the case of the ship, we could imagine that the reneging passenger would be enabled and required to find a new passenger to take his place.
In fact, this is what we find by house rentals. The lessor is not required to look for a new tenant, but the lessee is empowered to find another tenant to take his place. The Shulchan Arukh (authoritative Code of Jewish law) writes:
Just as the lessor has to give notice, so the lessee has to give thirty days notice in the city, or twelve months in the country, in order to give [the lessor] the ability to find a new tenant and not leave the house vacant. And if he didn't notify, he can't leave, rather he has to pay the rental. Or he can put in someone else in his place. But if he wants to give someone unsuitable, the lesser does not have to accept him. (3)
There are various explanations as to why the damaged party is responsible for mitigation in one instance, and the responsible party in others. The simplest is that it is fairest to impose the duty on the reneging party, who is after all at fault, but that in the case of a worker or passenger, there is more of a problem of some candidates being unsuitable; some workers may do poor work and some passengers may have problematic merchandise or conduct. But most tenants are pretty much alike.
So within the framework of Jewish law, you don't have to look for a tenant, but you have to allow your canceling tenant to do this. It would be fairest for you to also make an effort to find a replacement, and this would also be wisest since it would enable you to find a tenant you like.
SOURCES: (1) Babylonian Talmud Bava Metzia 76b and Tosafot commentary. (2) Babylonian Talmud Bava Metzia 79b (3) Shulchan Arukh Choshen Mishpat 312:7 and glosses of Rema.
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The Jewish Ethicist presents some general principles of Jewish law. For specific questions and direct application, please consult a qualified Rabbi.