Accelerated rent and traps for the unwary landlord

Commercial leases often give the landlord the right to accelerate rent through the end of the lease term when the tenant defaults.  Acceleration clauses do not usually cause too much controversy in litigation, but there is room for missteps by the landlord.

When a tenant breaches, Florida law generally gives the landlord three options: (i) terminate the lease and retake possession on the landlord’s account; (ii) retake possession on the tenant’s account; and (iii) do nothing and hold the tenant liable for remaining rent under the lease term.  Under the first option, the landlord gives up its right to accelerate rent (assuming the lease allows for it).  Under the second option, the landlord can accelerate rent if the lease allows for it, but the landlord must try to relet the space and offset accelerated rent with any new rent the landlord collects.  Under the third option, the landlord can sue for rent accrued up until the time of the lawsuit or perhaps a summary judgment hearing.  For more on these options generally, see here.

In a recent case, a tenant tried to argue that the landlord mis-executed on these optons, but the tenant still lost.  In JPAY, Inc. v. 10800 Biscayne Holdings, LLC, the landlord and tenant litigated since 2013 over what rent the tenant, JPAY, owed.  JPAY defaulted on rent, and the landlord sued for rent due, but did not ask for accelerated rent.  The landlord won summary judgment for rent due through the date of the hearing.  JPAY paid off the judgment.  The landlord later filed a new summary judgment motion for rent that had accrued since the original judgment.  This time the trial court sided with JPAY, ruling that the first judgment was “final,” meaning that the landlord could not seek further unpaid rent in the same lawsuit.  So the landlord filed a new lawsuit seeking the rent that had accrued since that judgment.  The trial court entered summary judgment for the landlord.

On appeal, JPAY argued that when the landlord sent a default notice and retook possession, the landlord was terminating the lease and retaking possession on the landlord’s account (option 1 above).  As a result, the tenant argued, accelerated rent was due at that time, but the landlord didn’t ask for it.  The appellate court disagreed because the landlord never gave any indication it was asking accelerated rent in the first or second lawsuits.  Had the landlord used language in its filings indicating that it was seeking accelerated rent, the result might have been different.

The appellate court also rejected JPAY’s argument that the judgment in the first lawsuit stopped the landlord from seeking further accrued rent.  In the first suit, the landlord sought then-accrued rent and in the second suit, the landlord sought rent that had accrued since the judgment in the first suit.  The landlord was suing for something different in the second suit, so it was not precluded by the judgment in the first suit.

Concerns over whether rent was properly accelerated probably do not come up too often in landlord-tenant litigation.  But as the JPAY case shows, there are opportunities for landlords to get acceleration wrong.

  • Matthew R. Chait

    Matt Chait is the Managing Partner of the West Palm Beach office of Shutts & Bowen LLP, where he is a member of the Business Litigation Practice Group. His statewide practice focuses on commercial real estate and land use litigation ...

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