## Facts

- Tenants Christopher and Melissa Knudsen rented an apartment from Robert Lax under a one-year residential lease beginning August 1, 2006.
- The lease was a six-page, 33-paragraph form obtained by the landlords and presented without negotiation.
- The lease included (1) an express covenant of quiet enjoyment and (2) an abandonment/liquidated-damages clause making tenants liable for rent for the balance of the term if they vacated early.
- In January 2007, a level-three sex offender moved into the adjacent apartment.
- The tenants, who had three young daughters, requested in writing to terminate the lease effective January 31, 2007, citing safety concerns; the landlord refused.
- The tenants vacated on January 31, 2007 and sought return of their security deposit.
- The landlord counterclaimed for approximately six months of rent remaining through the lease end (July 31, 2007).

## Issues

1. Whether tenants may terminate a residential lease early to protect their family when a level-three sex offender moves into the adjacent apartment, given the covenant of quiet enjoyment and New York public policy reflected in sex-offender registration and notification laws.
2. Whether a non-negotiated lease provision imposing liability for all remaining rent upon abandonment is unconscionable and unenforceable on these facts.

## Decision

- The court held the tenants were justified in terminating the lease early after a level-three sex offender moved next door.
- The court concluded the situation materially impaired the tenants’ ability to “peacefully and quietly” enjoy the premises in light of the statutory risk determination associated with level-three classification and the tenants’ family circumstances.
- The court found the abandonment/liquidated-damages clause unconscionable and declined to enforce it to award the landlord the remaining rent.
- The court awarded the tenants return of the security deposit and denied the landlord’s counterclaim for rent.

## Legal Principles

- A residential tenant may be excused from continued performance when post-lease circumstances substantially interfere with the tenant’s quiet enjoyment in a manner that makes continued occupancy unreasonable under the circumstances.
- New York’s sex-offender registration and notification scheme expresses a public policy of informing the public about higher-risk offenders so families can take protective measures; that policy may inform whether a tenant’s early departure is justified.
- Unconscionability may render a lease term unenforceable where there is both procedural unfairness (non-negotiated, take-it-or-leave-it form) and substantive unfairness (a one-sided rent-acceleration remedy applied regardless of compelling safety-related reasons for vacating).
- The implied covenant of good faith and fair dealing limits opportunistic reliance on boilerplate contract terms in circumstances where enforcement would be inconsistent with the contract’s purposes and relevant public policy.

## Conclusion

The court permitted tenants with minor children to terminate a residential lease after a level-three sex offender moved into the adjacent unit, and it refused to enforce a form lease clause that would have required payment of all rent for the remaining term, ordering return of the security deposit and rejecting the landlord’s rent counterclaim.


Knudsen v. Lax, 842 N.Y.S.2d 341 (N.Y. City Ct. 2007)