Commercial Investment Real Estate September/October 2018 | Page 20

LEGAL
BRIEFS
Beware of the
Double Dip
Avoid contamination of lease acceleration provisions.
by Peter Marullo, Esq.
F
18
September | October 2018
invalid merely because the landowner terminated the lease
and the tenant was no longer in possession, the court also
found that the tenant was entitled to a hearing on the issue of
whether the collection of undiscounted accelerated rent was an
unenforceable penalty:
“Defendants claim that because the acceleration clause
permits Van Duzer to hold possession and immediately
collect all rent due, the damages are grossly disproportionate
to the landowner’s actual damages. They contend this is a
windfall that allows Van Duzer to double dip [emphasis
added] — get the full rent now and hold the property.
On its face, this argument is compelling because arguably
the ability to obtain all future rent due in one lump
sum, undiscounted to present-day value, and also enjoy
uninterrupted possession of the property, provides the
landowner with more than the compensation attendant
to the losses flowing from the breach even though such
compensation is the recognized purpose of a liquidated
damages provision.”
COMMERCIAL INVESTMENT REAL ESTATE
ans of the show Seinfeld will no doubt recall how narcis-
sist George Costanza incurred the wrath of party guests
by “double-dipping” his potato chip into the onion dip,
thereby infecting the entire bowl with his germs. By
analogy, landlords should avoid the double dip in certain types
of acceleration clauses that may contaminate remedy provisions
of their leases.
Commercial leases commonly contain one of several variations
of rent acceleration provisions. The most aggressive type provides
that, upon tenant default and after notice and grace periods, the
landlord may terminate the lease and seek to recover as liquidated
damages, all of the rent that would have become due for the bal-
ance of the term in a lump sum.
Such a clause was the subject of the 2014 case of 172 Van
Duzer Realty Corp. v. Globe Alumni Student Assistance Association
Inc., in which the Court of Appeals considered a commercial
landlord’s lease provision that sought both possession of the
premises and acceleration of the remaining rent after the
tenant’s default and abandonment of the premises. While
the court held that this acceleration clause was not per se