## Facts

- Michael Albert, Inc. and Michael Albert (defendants/tenants) leased business premises from Aurora Business Park Associates (Aurora) under a five-year commercial lease beginning March 1, 1991.
- Albert vacated the premises in June or July 1993, before the lease term ended.
- Aurora was unsuccessful in reletting the property after Albert left.
- The lease contained an acceleration clause providing that if Albert terminated the lease in violation of its terms, Aurora could collect the remaining rent for the balance of the lease term.
- The acceleration clause also allowed Aurora to recover expenses incurred in collecting the accelerated rent and in attempting to obtain a replacement tenant (including attorney’s fees and costs).
- The clause further provided that Albert’s obligation would be reduced by any rent Aurora actually received from reletting the premises.
- Aurora sued Albert seeking rent for the remainder of the lease term under the acceleration clause.
- Albert moved to dismiss, arguing (1) Aurora had not been reasonably diligent in attempting to relet and (2) the acceleration clause was unenforceable; alternatively, Albert argued any award should be reduced by the fair market value of the premises returned to Aurora.
- The trial court denied the motion to dismiss and awarded Aurora $221,692.28 (with interest) plus attorney’s fees and costs.
- On Albert’s motion after judgment, the trial court reduced the future-rent component to its present value, resulting in an award of $215,251.90 (with interest).
- Albert appealed, arguing the acceleration clause overcompensated Aurora and operated as an unenforceable penalty.

## Issues

1. Whether the lease’s rent-acceleration clause was enforceable as liquidated damages, or unenforceable as a penalty because it placed Aurora in a better position than full performance would have provided.
2. Whether the tenant was entitled to a further reduction of the accelerated-rent award based on the fair market value of the premises returned to Aurora, beyond the clause’s credit for rent actually received from reletting.
3. Whether Aurora’s alleged lack of diligence in reletting barred or reduced recovery under the acceleration clause.

## Decision

- The court upheld the lease’s rent-acceleration clause as an enforceable liquidated-damages provision rather than an unenforceable penalty.
- The court approved reducing the accelerated future rent to present value so Aurora would recover the economic equivalent of the remaining rent stream rather than a windfall.
- The court rejected Albert’s request for an additional offset based on the premises’ fair market value, beyond the lease’s contractual credit for rent Aurora actually received upon reletting.
- The court affirmed the judgment for Aurora (including contract-authorized fees and costs), as adjusted to reflect present value of the accelerated future rent.

## Legal Principles

- A liquidated-damages provision is enforceable when the agreed amount is a reasonable forecast of anticipated loss at the time of contracting and actual damages are difficult to measure with precision.
- A rent-acceleration clause in a commercial lease may function as liquidated damages when it reasonably measures the landlord’s loss from premature termination and guards against double recovery by requiring a credit for rent actually received from reletting.
- An award of accelerated future rent should be reduced to present value to reflect the time value of money and avoid placing the landlord in a better financial position than performance would have produced.
- When the lease specifies a credit based on rent actually obtained from reletting, the tenant is not entitled to a further reduction based on hypothetical fair market value or assumed rental value of the premises.
- Contractual provisions allowing recovery of collection costs and attorney’s fees may be enforced when tied to the landlord’s efforts to collect amounts due under the lease.

## Conclusion

In *Aurora Bus. Park Assocs. v. Michael Albert, Inc.*, the court enforced a commercial lease acceleration clause after the tenant vacated midterm, holding it operated as valid liquidated damages rather than a penalty; the court approved discounting the accelerated future rent to present value and declined to reduce the award by the premises’ fair market value, limiting offsets to the contract’s credit for rent actually received from any reletting while permitting recovery of contract-authorized fees and costs.


Aurora Bus. Park Assocs. v. Michael Albert, Inc., 548 N.W.2d 153 (1996)