A Rent Acceleration Clause is a contractual provision that allows a landlord to demand immediate payment of the remaining unpaid rent for the entire lease term upon the tenant's default or breach of specific lease conditions.

Key elements of a well-drafted Rent Acceleration Clause:

1. Triggering Events: Clearly defining the specific events or circumstances that constitute a default or breach, such as non-payment of rent, violation of lease covenants, or unauthorized assignment or subletting.
2. Notice and Cure Period: Establishing procedures for providing written notice of default to the tenant and allowing a reasonable opportunity to cure or remedy the breach before acceleration.
3. Acceleration Demand: Specifying the landlord's right to demand payment of the entire remaining unpaid rent for the lease term, including any interest, fees, or penalties.
4. Calculation of Accelerated Rent: Outlining the methodology for calculating the accelerated rent amount, such as discounting future rent payments to present value or applying a specified interest rate.
5. Remedies and Enforcement: Detailing the landlord's rights and remedies upon non-payment of the accelerated rent, such as termination of the lease, eviction, or legal action.

Rent Acceleration Clauses are crucial in various types of commercial leases, particularly long-term leases or those involving significant rent obligations. Examples:

• Office Lease Agreement: "If Tenant fails to pay any installment of Rent or any other sum due under this Lease within ten (10) days after written notice from Landlord, or if Tenant otherwise defaults in the performance of any other covenant or condition of this Lease, Landlord may, at its option, declare the entire unpaid balance of Rent for the remaining Term to be immediately due and payable, discounted to present value at a rate of [X%] per annum."
• Retail Lease Agreement: "In the event of any default by Tenant under this Lease, Landlord may, at its option, declare the entire remaining unpaid Rent for the balance of the Term to be immediately due and payable, together with interest thereon at the rate of [X%] per annum from the date of such default until paid in full."
• Ground Lease Agreement: "Upon the occurrence of an Event of Default by Lessee, Lessor shall have the right, at its sole option, to declare the entire unpaid Rent for the remaining Term of this Lease, discounted to present value at a rate of [X%] per annum, to be immediately due and payable."

When reviewing a Rent Acceleration Clause, a contract drafter should be aware of:

• Reasonableness and Proportionality: Evaluating whether the acceleration of the entire remaining rent is reasonable and proportionate to the nature and severity of the tenant's breach or default.
• Notice and Cure Periods: Ensuring that the notice and cure periods are sufficient to allow the tenant a reasonable opportunity to remedy the breach before acceleration.
• Calculation Methodology: Carefully reviewing the methodology for calculating the accelerated rent amount, considering factors such as discount rates, interest rates, and the time value of money.
• Enforceability and Governing Laws: Ensuring that the Rent Acceleration Clause complies with applicable landlord-tenant laws, consumer protection regulations, and other relevant statutes in the governing jurisdiction.
• Interaction with Other Clauses: Analyzing the interplay between the Rent Acceleration Clause and other lease provisions, such as security deposit requirements, termination rights, and remedies for breach.

Other closely related clauses that contract drafters should consider in conjunction with the Rent Acceleration Clause include:

• Default Clause: Defining the specific events or circumstances that constitute a default under the lease agreement, which may trigger the Rent Acceleration Clause.
• Termination Clause: Provisions outlining the landlord's right to terminate the lease upon the tenant's default, including the interaction with the Rent Acceleration Clause.
• Security Deposit and Damages: Clauses addressing the application of the security deposit towards the accelerated rent or other damages, and the tenant's potential liability for any remaining deficiency.
• Remedies and Enforcement: Provisions detailing the landlord's rights and remedies upon non-payment of the accelerated rent, such as eviction, legal action, or the pursuit of personal liability against the tenant.

A famous example of a legal dispute arising from an incomplete or ambiguous Rent Acceleration Clause is the case of Kendall v. Ernest Pestana, Inc. (1985). In this case, the California Court of Appeal ruled that a Rent Acceleration Clause that failed to provide a methodology for calculating the accelerated rent amount was unenforceable due to its uncertainty and lack of clarity. The court held that "a provision which simply states that all remaining rent for the balance of the term shall be due and payable is insufficient and unenforceable." (Citation: Kendall v. Ernest Pestana, Inc., 40 Cal. 3d 488 (1985)).

By carefully drafting and reviewing Rent Acceleration Clauses, in conjunction with related lease provisions, corporate lawyers can protect their clients' interests, manage risks associated with tenant defaults, and ensure a clear understanding of the rights, obligations, and consequences related to the acceleration of unpaid rent obligations.

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