New Hampshire Supreme Court Allows Landlord to Recover “Tenant Allowances” for New Tenants After Default

When a landlord pays “tenant allowances” to replacement tenants after a default, can the landlord recover those payments as damages from the original tenant?

Background

In December 2016, a landlord and tenant entered into a ten‑year tenancy for retail space in Seabrook, New Hampshire.

The tenant operated a go‑karting business at the premises.

During the COVID‑19 pandemic, the tenant closed for several months and later reopened with limited hours.

In May 2021, the parties attempted to negotiate an early termination. Those negotiations failed.

The tenant then stopped paying rent and vacated the premises.

To relet the premises, the landlord needed to subdivide the space and lease it to two replacement tenants rather than a single user.

That decision required alterations to the premises and resulted in substantial fit‑up costs. Some work was performed directly by the landlord (“landlord work” in the new leases). Other work was performed by the replacement tenants and reimbursed by the landlord through “tenant allowances” in the new leases.

The landlord then filed suit in New Hampshire Superior Court alleging breach and seeking damages from the original, defaulting tenant.

Superior Court

The Superior Court found the tenant liable for breach of the lease and calculated damages at nearly $3 million before mitigation.

The court found the landlord mitigated its damages by reletting the premises to two replacement tenants rather than leaving the space vacant.

The lease allowed the landlord, following a tenant default, to recover the costs of “alterations” necessary to relet the premises but the lease did not define the word alteration.

The court treated two categories of fit‑up expense - work performed directly by the landlord and work performed by the replacement tenants and reimbursed through allowances - as recoverable “alternations” necessary to relet the premises.

After accounting for rent received from the replacement tenants, the court included those alteration costs in the damages calculation and awarded $2,107,985.10.  (The lease was personally guaranteed.)

Supreme CourT

The tenant appealed, arguing that “tenant allowances” and landlord‑performed work under the replacement leases were discretionary inducements, not costs caused by the breach.

The landlord argued the original lease allowed recovery of alteration costs required to relet the premises after default. The landlord also relied on testimony showing the market required these expenditures in order to secure replacement tenants.

The Supreme Court affirmed the Superior Court’s decision.

The lease allowed the landlord to recover the costs of alterations necessary to relet the space. Because the lease did not define the word “alteration,” the trial court discerned the plain meaning of the word by looking to Black’s Law Dictionary, a book familiar to lawyers and judges. The Supreme Court approved that approach.

The Court also relied on the evidentiary record. Witnesses explained that landlord‑performed work and tenant allowances served the same functional purpose. Both were mechanisms for delivering the fit‑up required to place replacement tenants into the subdivided space.

The Court rejected the argument that these costs were merely incentives. It accepted the finding that refusing to incur them would have delayed or prevented reletting and increased the landlord’s losses.

The Court also noted that the original tenant itself had received a construction allowance to convert the space for its own use. That context supported treating similar allowances for replacement tenants as alteration‑related costs under the original lease.

Because the fit‑up expenses were incurred to relet the premises following the breach, the Court concluded they were recoverable costs of alterations and reletting under the original tenancy agreement.

Key takeaway

Economic reality matters more than labels. When unrebutted evidence shows that certain expenditures are required to relet space after a tenant’s breach, courts may treat those costs as recoverable damages even if the lease uses different terminology.

Brixmor GA Seacoast Shopping Center LLC v. NH1 Motorplex LLC, No. 2025‑0067 (non‑precedential order) (N.H. Mar. 19, 2026). (Because the Court issued an “order” rather than an “opinion,” the ruling has no precedential authority over other cases, but it may provide guidance on how New Hampshire courts may approach similar issues in the future.)

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