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Rent Acceleration Clauses in New York
When is a rent acceleration clause in a commercial lease enforceable? The Court of Appeals addressed that question in 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Association, Inc. (NYLJ 12/19/14, p. 23., col. 5), and gave an answer that is unlikely to be helpful to anyone but litigators: A rent acceleration clause is enforceable unless it constitutes a penalty. The court, however, provided little guidance about when a rent acceleration clause would constitute a penalty.
The Case
Landlord leased the premises to the Association for one year for use as a dormitory by Globe Institute of Technology (Globe), a for-profit educational institution. Landlord and the Association then extended the lease for a nine-year period, and Globe signed a guarantee making it jointly and severally liable with the Association. The lease included a rent acceleration clause providing that upon tenant's default, landlord “shall be entitled to recover, as liquidated damages a sum of money equal to the total of ' the balance of the rent for the remainder of the term.” The lease also provided that “[i]n the event of Lease termination Tenant shall continue to be obligated to pay rent and additional rent for the entire Term as though th[e] Lease had not been terminated.”
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