Accelerated Rent Clause Is Not Recoverable In Summary Proceeding

The subject matter jurisdiction of the District Courts in summary proceedings to recover possession of real property is limited. It is limited by Uniform District Ct Act § 204, which provides in relevant part:

The court shall have jurisdiction of summary proceedings to recover possession of real property located in whole or in part within . . . to remove tenants therefrom, and to render judgment for rent due without regard to amount” (emphasis added).

What about an accelerated rent clause, which is a clause which requires a tenant to pay the entire amount left due on a lease after a tenant vacates an apartment? Last week the Second Department in Ross Realty v V & A Fabricators, Inc., 2007 NY Slip Op 04278 held that accelerated rent is not “rent due” and thus not enforceable in District Court.

The matter arose as follows. The landlord and tenant had entered into a commercial lease for a term of five years, commencing May 1, 2003. Shortly thereafter, the defendant became dissatisfied with the space, failed to pay the June 2003 rent, and abruptly vacated the premises. The plaintiff thereafter commenced a summary proceeding in the District Court for nonpayment of the June rent and to recover possession of the property. The proceeding was commenced pursuant to article 7 of the New York Real Property and Proceedings Law and § 204 of the Uniform District Court Act. Immediately prior to the commencement of the nonjury trial, the landlord orally moved to amend its petition to also recover accelerated rent, as provided for in the lease. Following trial, the District Court found a surrender of the premises by operation of law and granted the plaintiff a judgment of possession and rent for the month of June 2003. The District Court declined to award the plaintiff accelerated rent.

Thereafter, the landlord commenced a plenary action in Supreme Court which contained causes of action for approximately $20,000 in what the landlord characterized as “rental” payments for the months of July, August, and September 2003, during which the premises remained vacant, and to recover the difference between the rent the tenant was to pay and the rent that a subsequent tenant paid, approximately $53,000 (thus in effect the landlord was seeking the accelerated rent). The tenant moved to dismiss these causes of action on the ground that they were barred by the doctrine of res judicata based upon the prior District Court proceeding. The Supreme Court granted the tenant’s motion, but the Second Department reversed.

The Second Department found that once the landlord succeeded in its summary proceeding, the parties’ relationship as landlord and tenant terminated, and whatever monetary liability the tenant may have had to the landlord at that point was no longer in the nature of rent, but was in the nature of contract damages. And since the jurisdiction of the District Court was limited to recovery of “rent due” such damages were not within the subject matter of the District Court action. Thus, since the District Court court lacked subject matter jurisdiction over the claims in the plenary Supreme Court action, its determination could not be res judicata. The Second Department thus reinstated the landlord’s causes of action in Supreme Court.

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