18 Years of Rent Is Unenforceable Penalty

An owner and a restaurant tenant signed a 22-year lease. Four years later, the tenant stopped operating. The owner warned the tenant that if it didn't pay the current month's rent, the owner would accelerate the rent for the remainder of the lease under the lease's liquidated damages clause. The tenant ignored the owner's warning. The owner sued the tenant for all 18 remaining years' rent payments. The tenant argued that the liquidated damages clause was an unenforceable penalty.

A Georgia appeals court ruled that the liquidated damages clause was an unenforceable penalty. The court noted that the owner was trying to collect 18 years of rent at once. But the lease didn't try to determine if that accelerated rent payment would bear any reasonable relationship to the owner's actual damages, said the court. Also, the lease should have required the accelerated rent to be reduced to its present value and the owner to relet the space—but it did neither [Nobles v. Jiffy Market Food Store Corp.].