Duzer Realty Corp. v. Globe Alumni Student Assistance Association, Inc. 12/18/2014
This case involved the enforceability of a rent acceleration clause for future rental payments, from an out of possession tenant. The facts of the case involve the landlord who had leased the premises to the Globe Alumni Student Assistance Association for one year, for use as a dormitory by Globe Institute of Technology (Globe), an educational institution. The 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 the tenant’s default, the 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 “in the event of Lease termination the tenant shall continue to be obligated to pay rent and additional rent for the entire term as though the Lease had not been terminated.” Following the signing of the lease extension, the landlord sent the Association a “notice to cure” for failure to maintain the premises, citing violations issued by the New York City Environmental Control Board.
A notice to cure is a device a landlord may wish to employ if a tenant has violated their lease. This “notice” informs the tenant that they have ten days to correct the lease violation. If the tenant fixes the problem, the landlord cannot take any further steps against the tenant. However, if the tenant does not correct the violation however, the landlord can give the tenant a notice of termination.
The notice in this particular case demanded the tenant to cure the offending issue, i.e the non-payment of rent within 30 days. Instead of curing, the Association vacated the premises and stopped paying rent as of February 2008. The landlord terminated the lease, which was effective from March 28th, 2008, and, in August 2008, and was awarded a judgment on the issue of liability obtaining damages.Upon referral to the Supreme Court of New York, Appellate Division First Department, it was held that the acceleration clause was valid simply because the landowner terminated the lease and the tenant was no longer in possession; but the tenant should have been permitted to present evidence in support of their dispute, that the undercounted acceleration of all future rent amounted to an unlawful penalty.
By: Gurpreet Basra, Legal intern at Bikram Singh Law, P.C.