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Scott E. Mollen

Commercial Landlord-Tenant—Landlord Delivered Premises Approximately One Year Late—Rent Credit Provision Was an Unenforceable Penalty—Plaintiff Is Entitled to Reasonable Damages—Successive Offers of Compromise Permitted—Landlord Entitled to Legal Fees and Costs Since Award Was Below Offer of Compromise—Neither Side Was A Prevailing Party—Severe Decline in Sales at Brick and Mortar Stores in New York City

A plaintiff retail tenant commenced an action, alleging that the defendant landlord delivered the subject premises approximately a year after the date contemplated by the lease. The lease provided that the premises would be delivered to the tenant “as a ‘white box’” in August 2015, and the tenant would take an additional four months to prepare the premises for opening in December 2015 (tenant work). Following a trial, the court found that the proposed schedule was “excessively ambitious,” it was unreasonable to expect that the premises would have opened in December 2015, and the “late delivery” rent credit provision (penalty provision) in the lease bore “no reasonable relationship to any foreseeable damages” and therefore, was an unenforceable penalty. However, the court held that the tenant was entitled to reasonable damages.

The plaintiff had not accepted delivery of the premises until July 12, 2016. The court opined that the “contemplated schedule was excessively ambitious on the part of both parties and, based upon the evidence…there is no reason to believe that the store could have opened in December, 2015 under any scenario.”

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