Is The Rent Acceleration Clause in Your Lease Enforceable?
The default clause of most leases provides that upon the tenant’s material default, the landlord has the right to retake possession, relet the premises at the tenant’s expense and accelerate the tenant’s rent payment obligation. In a recent decision issued by the Massachusetts Appeals Court, Cummings Properties, LLC v. Hines, the Court held that a liquidated damages provision that accelerates rent upon a tenant’s default of a lease is unenforceable unless it provides that the tenant will be credited for any rent collected from a new tenant during the balance of the lease term or discounts the stipulated damages to reflect the likelihood of reletting.
In early 2016, Massachusetts Constables Office, Inc. (“MCO”) secured a contract with the Massachusetts Department of Revenue (“DOR”), leading Darryl Hines, the owner, sole officer and director of MCO, to seek out office space in Woburn, the town where he thought the majority of his work would occur. On April 15, 2016, MCO entered into a five-year lease with Cummings, a major player in the Massachusetts commercial real estate market, with a base rent of $16,374 per year. The default provision of the lease provided that upon a default in the payment … Keep reading