May 3, 2026

I was honored to be asked to write a practice note for Lexis, entitled Common Tenant Defenses in Commercial Lease Eviction Proceedings. Below I will include one section of the article.

Defenses to Landlord Utilizing an Acceleration of Rent Clause

Rent Acceleration Clauses Generally

Normally a landlord will sue a tenant for all the rent the tenant owes through the date of a trial. Then, after the tenant is evicted, if the lease term would have otherwise extended beyond the date of eviction and if nobody else rents the space, the tenant owes the landlord more money and the landlord is forced to sue the tenant all over again. As a practical matter, this seldom happens for two reasons, either: (a) the case settles and that ends the tenant’s continuing liability; or (b) the tenant is judgment-proof, and the landlord has no incentive to sue the tenant further. Nevertheless, to deal with this issue, many commercial leases contain a clause, sometimes referred to as a “fair-market acceleration clause.” It is a formula that works as follows:

Example: The tenant’s rent is currently $38k. If the fair market value is $20k per month. The delta is approximately $18k a month. There are 27 months left on the lease. Theoretically, if there is a fair market rent acceleration clause, the landlord could sue the tenant all at once for a number in the vicinity of $486,000 (27 x $18k).

The theory behind this clause seems to be that if the landlord is forced to replace an over-market tenant, the landlord will lose the benefit of the over-market bargain. This clause makes the defaulting tenant all-at-once responsible for those losses.

Commercial landlords in New York are not subject to a duty to mitigate a tenant’s damages. Holy Props., Ltd., L.P. v. Kenneth Cole Prods., Inc., 208 AD2d 394 [1st Dept 1994], affd, 87 NY2d 130 [1995].

No Acceleration of Rent Absent a Lease Clause Calling for Such

There can be no acceleration of rent absent a lease clause calling for such. 210 W. 29th St. Corp. v. Chohan, 13 AD3d 613 [1st Dept 2004]; 23 E. 39th St. Developer, LLC v. 23 E. 39th St. Mgmt. Corp., 172 AD3d 964 [2d Dept 2019] (“No action can be brought for future rent in the absence of an acceleration clause.”)

Overcoming a Rent Acceleration Clause Found to be a Penalty

A rent acceleration clause may, however, be overcome if such clause is found to be a penalty. 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 NY3d 528 [2014] (“…an acceleration clause is subject to judicial scrutiny based on a challenge that it is nothing more than a means by which to exact a penalty otherwise proscribed by the law…Whether a provision in an agreement is an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances…[citations omitted throughout]. The burden is on the party seeking to avoid liquidated damages…to show that the stated liquidated damages are, in fact, a penalty…Where a party establishes a penalty, the proper recovery is the amount of actual damages established by the party…”)

This concept applies to surrender agreements as well as to leases. See also Trustees of Columbia Univ. in the City of N.Y. v D’Agostino Supermarkets, Inc., 36 NY3d 69 [2020] (Liquidated damages authorized by a surrender agreement, after the former tenant sought release from its lease obligations, were grossly disproportionate to the harm resulting from the breach of the agreement, and, thus, was an unenforceable penalty, in an action brought by the former landlord alleging that the former tenant breached the agreement by failing to make the required installment payments. The damages authorized by the surrender agreement, which essentially restored the amount originally due under the lease, were over seven times the amount that the former landlord would have recovered had the former tenant fully complied with surrender agreement.)

Enforceability of a Rent Acceleration Clause Without Fair Market Value Offset

Enforcement of a rent acceleration clause may not be appropriate if it is undiscounted by, for example, the fair market value of the amount that would be due between the default and the end of the lease. University Sq. San Antonio, TX. LLC v. Mega Furniture Dezavala, LLC, 198 AD3d 1284 [1st Dept 2021] (“Additionally, because [the landlord] seeks accelerated rent constituting liquidated damages [citations omitted], [the tenants] should have been afforded an opportunity to obtain information regarding whether the undiscounted accelerated rent amount was disproportionate to [the landlord’s] actual losses and thus an enforceable penalty.”)

Enforceability of a Rent Acceleration When Tenant Remains in Possession

Furthermore, enforcement of a rent acceleration clause is not appropriate where a tenant continues in possession of the subject premises. Chelsea 8th Ave. LLC v. Chelseamilk LLC, 220 AD3d 565 [1st Dept 2023] (“…Here, although styled as a liquidated damages clause, paragraph 18(c) of the parties’ standard form of store lease specifically states that [the tenant’s] liability after [the tenants] are restored to possession of the premises is limited to ‘any deficiency between the rent hereby reserved and/or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease,’ and future installments continue to become due on the usual rent date specified in the lease. Therefore, an award of rents that have not yet become due under the lease could impermissibly render the requested award disproportionate to [the landlord’s] actual losses… ).

No Accelerated Rent if Damages Are Mitigated by Re-Renting

A landlord may not be awarded accelerated rent if it has already mitigated its damages by re-renting a premises. Elk 33 E. 33rd LLC v. Sticky’s Corporate LLC, 228 AD3d 455 [1st Dept 2024] (“Here, Article 70.11.1 of the lease permits landlord to accelerate and collect the aggregate of the rent and additional rent due through the expiration of the lease, discounted to present value by 4% per annum, upon default or landlord’s reentry into the premises, or to collect rent and additional rent when due through the end of the lease, provided a net credit is given to tenant in the event that the premises is relet… However, landlord concedes on appeal that it relet the premises and began collecting rent from a new tenant as of January 2023… While landlord was permitted to accelerate the entire rent, it is not permitted to an acceleration pursuant to Article 70.11.1(I) and to relet the premises under subsection (II)… ”). See also ALQ, LLC v. Kane, 197 AD3d 1029 (1st Dept 2021].

Accelerated Rent Unavailable in Summary Proceedings for Possession

Accelerated rent may not be sought in a summary proceeding for the recovery of real property, because a summary proceeding is only for the recovery of rent and accelerated rent is in the nature of contract damages. Prospect Res. Inc. v. Levant Cap. N. Am., Inc., 237 AD3d 550 455 [1st Dept 2025] (“…Civil Court…determined the eviction proceeding, is without authority to address a claim for the balance of rent due as liquidated damages [citations omitted]…Thus, once [the landlord] had been awarded judgment in the summary proceeding, the parties’ relationship as landlord and tenant ended and whatever monetary liability [the tenant] may have had to [the landlord] at that point was no longer in the nature of rent, but was in the nature of contract damages… ”)

Respectfully submitted,

Michelle Itkowitz