Is Holdover Rent of 200% of Base Rent a Valid Liquid Damages Provision?

January 26, 2022

What Happened: After siding with the landlord on all claims, a New York court had one more issue to decide, namely, whether the lease clause requiring the tenant to pay 200 percent of base rent as holdover rent was enforceable. The tenant claimed that 200 percent was an unenforceable penalty; the landlord claimed it was a valid liquidated damages provision.

Ruling: The New York court ruled that the clause was enforceable.

What Happened: After siding with the landlord on all claims, a New York court had one more issue to decide, namely, whether the lease clause requiring the tenant to pay 200 percent of base rent as holdover rent was enforceable. The tenant claimed that 200 percent was an unenforceable penalty; the landlord claimed it was a valid liquidated damages provision.

Ruling: The New York court ruled that the clause was enforceable.

Reasoning: As in many states, lease clauses fixing damages in the event of breach are enforceable if the amount “bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation.” In attacking the clause, the tenant had the burden of showing that: (1) 200 percent was disproportionate to the probable loss; and/or (2) the loss could have been estimated at the time the lease was signed. Because the tenant provided evidence supporting neither of these things, the court upheld the clause.

  • ESRT 501 Seventh Ave., L.L.C. v. Regine, LTD.: 2021 N.Y. Misc. LEXIS 6193, 2021 NY Slip Op 32524(U)

 

 

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