## Facts

- A commercial tenant leased about 3,000 square feet of office space in Portland under a five-year lease (Apr. 1, 1971–Mar. 31, 1976) with graduated rent, reaching \$1,415 per month for the final 48 months.
- The tenant vacated the premises on July 31, 1973, with 32 months remaining, and paid no further rent.
- A receiver was appointed for the tenant; the landlord’s successor in interest (a bank) filed a claim in the receivership for unpaid rent/damages.
- The landlord attempted to relet the premises after abandonment and later relet effective Feb. 1, 1974, to a new tenant at a higher rent for a term extending beyond the original lease expiration.
- The replacement tenant defaulted and vacated on July 14, 1974, after paying \$7,500 total rent.
- The landlord marketed the space again and relet it effective Aug. 1, 1975.
- The bank sought damages for Aug. 1, 1973–July 31, 1975 (24 months at \$1,415/month), less the \$7,500 received, for a net claim of \$26,460.
- The receiver argued that reletting (especially at higher rent and longer term) and/or a lease clause allowing termination upon appointment of a receiver terminated the original lease and cut off post-reletting liability.

## Issues

1. Whether reletting abandoned commercial premises at a higher rent and for a term beyond the original lease constitutes a termination of the original lease as a matter of law, freeing the original tenant from post-reletting damages.
2. Whether a lease provision stating the landlord “may” terminate upon appointment of a receiver was exercised or effectuated by reletting so as to end the tenant’s post-reletting liability.

## Decision

- The Oregon Supreme Court reversed and remanded.
- Reletting at a higher rent and for a longer term did not terminate the original lease as a matter of law.
- The tenant could remain liable for damages during the unexpired portion of the original term for periods when the premises were vacant, subject to credits for rent actually received and mitigation.
- The receiver-termination clause was permissive and not self-executing; reletting did not, by itself, constitute a clear exercise of termination that would bar later damages.

## Legal Principles

- A landlord’s reletting of abandoned commercial premises, even on different terms (including higher rent and a longer term), does not automatically constitute acceptance of surrender or termination of the original lease.
- Whether a landlord accepted surrender/terminated the lease turns on manifested intent and surrounding circumstances, not a categorical rule based solely on the terms of the replacement lease.
- A clause allowing the landlord to terminate upon appointment of a receiver is permissive; termination requires a clear act indicating the landlord’s election to terminate.
- After abandonment, the tenant may be liable for contract damages corresponding to vacancy periods within the original lease term, reduced by amounts actually received from substitute tenants and subject to reasonable mitigation efforts.

## Conclusion

The court held that the landlord’s mitigation through reletting—despite higher rent and a longer replacement term—did not, without clear intent, terminate the original commercial lease or cut off the tenant’s liability for damages during vacancy periods within the original term, and it remanded for further proceedings to determine damages consistent with mitigation and credit rules.


United States National Bank of Or. v. Homeland, Inc., 291 Or. 374, 631 P.2d 761 (Or. 1981)