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Rental Agreement Acceleration Clause

Opublikowano: środa, gru 16, 2020

An acceleration of the rental provision gives the landlord the right to demand, after being delayed by the tenant, the total balance of the unpaid rent of the tenancy agreement, for the rest of the term, in a lump sum. Under the law of most states, if there is no acceleration of the rental provision, the landlord generally does not have the right to collect rent from the tenant, as it is due under the lease each month for the remainder of the term. This was the case in a decision made by Massachusetts in 2007. In Cummings Properties, LLC v. National Communications Corp. (449 mass. 490), the Massachusetts Supreme Judicial Court held that a compensation clause liquidated in a commercial lease agreement, which provides for a complete acceleration of future rent after a default by the tenant, is enforceable. The second part of this contribution will be published next week and will discuss how landlords can include an enforceable acceleration of rent provisions in their leases. Look back! Such an outcome would not be good for most judges. If the judges rule on such an issue, they would consider, as the Montana Supreme Court recently did, whether the accelerated rent clause is unacceptable.

Although acceleration clauses are not common and often heavily negotiated, this decision allows both tenants and guarantors to warn that in the event of a material default under a commercial lease, they may be liable for significant damages equivalent to the accelerated rent owed for the remainder of the lease term. In general, default is what triggers the tenant`s acceleration and obligation to cover the cost of future rent. How the acceleration of the rental also depends on how the owner writes the lease. In some cases, a certain default, such as the removal of facilities or inventory, insolvency or non-payment of rent, will trigger an accelerated rent. However, some commercial leases contain a provision that any default can lead to an acceleration of rents. In its explanatory statement, the Court of Appeal dismissed the tenant`s appeal of Fifty States Management Corp. and found that, despite the recapture of the premises, the lessor „was allowed to claim damages pursuant to the acceleration clause after the end of the lease, as soon as the defendants were in default and breached their lease obligations for the maintenance of the property and the payment of rent.” The Court of Appeal also rejected the tenant`s assertion that the acceleration clause constituted an unenforceable sanction. The court found that the acceleration clause was enforceable and not a penalty because the defendants „committed substantial breaches of the tenancy agreement by terminating all rents from February 2008, while abandoning the premises.” In referring to Holy Properties Ltd, L.P. v. Kenneth Cole Productions, Inc.,[iii], the court also briefly responded to the defendant`s allegation and dismissed the allegation that the lessor was required to mitigate its harm.

Such a clause was the subject of the case of 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Association Inc., in 2014, in which the Court of Appeal considered a commercial landlord`s tenancy rule for both the ownership of the premises and the acceleration of the remaining rent after the tenant`s failure and the abandonment of the premises. While the court found that this acceleration clause was not in itself invalid simply because the owner of the land had terminated the lease and the tenant was no longer in possession, the court also found that the tenant was entitled to a hearing on whether the collection of the unbilled accelerated rent was an unenforceable penalty In September 2009, the lessor filed an appeal by the Supreme Court. to recover rent arrears and future residual rent under the tenancy agreement.


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