The scenario we are about to discuss occurs often in real estate rentals, and is usually accompanied with the following question:

A prospective tenant gave me a deposit for an apartment rental, 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?

This question deals with a concept known in secular law as “mitigation.” When one party is liable for a loss caused to another, typically the person suffering the loss has an obligation to mitigate the damage before holding the other responsible. When your prospective tenant cancels a rental agreement on short notice, he causes you a loss because if he hadn’t grabbed the apartment you would have likely 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, but in this column we will focus 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 to find another job is he entitled to compensation. Likewise, if a worker suddenly leaves his 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)

A parallel situation is discussed in the Gemara:

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 bears the responsibility, and the right, of mitigation. We could imagine in the above cases that even if the worker didn’t have to seek alternative employment, the employer might be empowered to look on his behalf. Likewise, even if the employer wasn’t required to look for replacement workers, the quitting worker might be empowered to find him one. 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 Shulhan Aruch writes:

Just as the lessor has to give notice, so the lessee has to give 30-day notice in the city, or 12 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 cannot leave, and must rather 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 do not have to look for a tenant, but you have to allow your canceling tenant to do so. It would be fairest for you to also make an effort to find a replacement, and this would also be wisest, as it would enable you to find a tenant you like.

SOURCES: (1) Bava Metzia 76b, and Tosafot. (2) Bava Metzia 79b. (3) Shulchan Aruch Hoshen Mishpat 312:7, and glosses of Rema.

Rabbi Dr. Asher Meir is Research Director at the Business Ethics Center of Jerusalem (www.besr.org). He is also a Senior Lecturer in Economics at the Jerusalem College of Technology and has published several articles on business, economics and Jewish law. He is the author of the two-volume, Meaning in Mitzvot (Feldheim), and his Aish.com columns form the basis of the book Jewish Ethicist (ktav.com).