Constellation-F, LLC v. World Trading 23, Inc.

Facts: A landlord leases commercial space to a tenant. The lease agreement contains a boilerplate graduated rent provision calling for a 150% increase from base rent when the tenant holds over after the lease expires. The tenant fails to vacate the property at the end of the lease term. The landlord files an unlawful detainer (UD) action to evict the tenant.

Claim: The tenant claims the landlord cannot collect holdover rent at the increased rate since contract provisions which liquidate damages for a breach of the contract are not valid unless the provision was unreasonable under the circumstances existing at the time the lease agreement was signed.

Counterclaim:  The landlord seeks money losses for unpaid rent from the tenant, claiming the tenant is liable for holdover rent since the lease’s holdover rent provision was reasonable when entered into and entitles the landlord to unpaid rent at the increased 150% rate during their holdover tenancy.

Holding:  A California court of appeals held that the landlord may collect money losses from the tenant for unpaid rent at the increased rate since the holdover rent provision in the lease was reasonable at signing. [Constellation-F, LLC v. World Trading 23, Inc. (February 7th, 2020) __ CA6th__]

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