Accelerated Rent Clauses In Massachusetts Commercial Leases

• Published date: 23 December 2022
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Real Estate, Landlord & Tenant - Leases
• Law Firm: Holland & Knight
• Author: Nadya Makenko

Massachusetts' highest court, in its 2007 opinion in Cummings Properties, LLC v. National Communications Corp., 449 Mass. 490, 494 (2007), shocked commercial leasing lawyers by announcing that accelerated rent clauses (i.e., provisions allowing landlords to terminate a tenant's lease and collect all rents through the end of the term in a lump sum) are enforceable and acceptable liquidated damages provisions. The legal community then agreed that the National Communications decision was a typical example of bad facts making bad law.

Now 15 years later, the Massachusetts Appeals Court considered the same provision in a commercial lease with the same landlord in Cummings Properties, LLC v. Darryl C. Hines, No. 21-P-1153, and held in its Dec. 5, 2022, opinion that "[a] provision such as this bears no reasonable relationship to expected damages and is thus unenforceable as a penalty." The Appeals Court confirmed what the Massachusetts Supreme Judicial Court back in 2007 should have done - that the scenario which allows "[landlords] to retake possession of the premises, relet it and collect rent from the new tenant, and recover all the remaining rent owed by [defaulting tenant], without having to account for the rent received from the new tenant during the term of the original lease" is "unreasonably and grossly disproportionate to the real damages from a breach."

Unfortunately, the National...