KIM v. BEDOUET (2025)

Order, Supreme Court, New York County (Suzanne Adams, J.), entered on or about February 6, 2024, which, to the extent appealed from, denied plaintiffs’ cross-motion for summary judgment on their breach of contract claim, unanimously reversed, on the law, without costs, the motion granted, and the matter remanded for a determination of the amount due under the liquidated damages provision of the parties’ contract.

Supreme Court declined to grant summary judgment, finding triable issues of fact in this action between plaintiffs, purchasers of a cooperative apartment, and defendant seller.  Defendant seller, who requested continued possession of the apartment after closing for one month, complains that the holdover rent set in the liquidated damages provision of the post-closing possession agreement is grossly disproportionate because, over the course of 30 days, it amounted to three times the amount of rent set for the initial 30–day period of possession.  However, “[w]hether a provision in an agreement is an enforceable liquidation of damages or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances” (172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 N.Y.3d 528, 536, 2 N.Y.S.3d 39, 25 N.E.3d 952 [2014] [internal quotation marks omitted]).  The party “seeking to avoid liquidated damages” bears the burden “to show that the stated liquidated damages are, in fact, a penalty” (id. [internal quotation marks omitted]).

Plaintiffs’ cross-motion for summary judgment should have been granted.  “[L]iquidated damages clauses that permit a landlord to recover between two or three times the amount of the existing rent or license fee in a holdover proceeding are not ‘grossly disproportionate’ to the probable loss and therefore, not a penalty” (Seymour v. Hovnanian, 211 A.D.3d 549, 554, 180 N.Y.S.3d 33 [1st Dept. 2022];  see NGM Mgt. Group LLC v. Bareburger Group LLC, 224 A.D.3d 600, 603–604, 206 N.Y.S.3d 267 [1st Dept. 2024];  Victoria's Secret Stores, LLC v. Herald Sq. Owner LLC, 211 A.D.3d 657, 658, 181 N.Y.S.3d 531 [1st Dept. 2022]).  Moreover, defendant does not account for plaintiffs’ payment during the holdover period of the maintenance and assessment, in addition to the mortgage.  The agreement further provides that defendant is responsible for plaintiffs’ costs of administering the agreement, among other things, which were unknown at the time the agreement was signed.  Thus, “the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation” (Seymour, 211 A.D.3d at 553, 180 N.Y.S.3d 33 [internal quotation marks omitted]).

Furthermore, defendant cannot establish substantive unconscionability since the liquidated damages provision is not “unreasonably favorable” to plaintiffs (King v. Fox, 7 N.Y.3d 181, 191, 818 N.Y.S.2d 833, 851 N.E.2d 1184 [2006];  see Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1, 10–11, 537 N.Y.S.2d 787, 534 N.E.2d 824 [1988]).  Nor is there evidence to establish that defendant lacked meaningful choice, as defendant admittedly knew he needed to move out prior to closing, he himself sought the agreement to extend his possession, and he testified that his attorney negotiated the agreement, explained it to him, and that he trusted the attorney (see King, 7 N.Y.3d at 191, 818 N.Y.S.2d 833, 851 N.E.2d 1184).  Furthermore, plaintiffs’ insistence that the apartment sale close before their rate lock expired, about two and a half months after the parties executed the contract of sale, does not constitute “high-pressure tactics” or show an imbalance of bargaining power with respect to the post-closing agreement (Gillman, 73 N.Y.2d at 10–11, 537 N.Y.S.2d 787, 534 N.E.2d 824).

As defendant admittedly vacated the apartment well after the initial 30–day period of possession contemplated, he triggered the liquidated damages provision, and is liable under it.

We have considered the remaining contentions and find them unavailing.