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NY Court Rewrites Rules On Liquidated Damages In Surrender Agreements
In a recent decision, the NY Court of Appeals handed down a 4-3 decision with a new interpretation of the law of liquidated damages with regard to surrender agreements. Trustees of Columbia v. D'Agostino, —N.E.3d—, 2020 WL 6875988, 2020 N.Y. Slip Op. 06937 rewrites the rules of when a tenant simply gives up on the space.
In Trustees v. D'Agostino, two great icons of New York City had, as sophisticated business entities, negotiated the reduced rent of the space the famed supermarket chain was renting and eventually surrendered from the esteemed university. In their surrender agreement, the parties had negotiated for D'Agostino to make vastly reduced payments compared to those called for under the lease over a payout period, upon default of which payments, D'Agostino was to be held liable to Columbia for the full remaining amount of unpaid rent under the unexpired term of the lease the surrender agreement had canceled.
Background
Columbia, although having broad implications for the pandemic, did not arise from the pandemic itself, but four years earlier when D'Agostino stopped paying its rent under the lease from Colombia University. With some two years remaining on the lease and D'Agostino still in possession of the premises, the parties entered into a surrender agreement that called for D'Agostino to make payments calling for approximately $260,000, roughly a quarter of what the remaining payments under the lease would have been.
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