Not when the daily amount is added on top of actual damages. In an August 2024 decision, the Appeals Court held that a commercial lease clause requiring the landlord to pay the tenant its actual damages plus $500 per day for unfinished work was an unenforceable penalty. The tenant recovered its proven actual damages, but not the roughly $600,000 the daily charge would have added. This is a published decision of the Appeals Court and is binding statewide.
What happened
In 2013 a developer signed a lease for a new child care center in Tyngsboro. The developer missed the deadline for a certificate of occupancy by almost two years. A 2016 first amendment set a new deadline and raised the rent, and said it would be void if that deadline was missed. The certificate issued thirty-five days late. The lease said that if punch list items stayed unfinished thirty days after notice, the landlord would pay the tenant its actual damages plus $500 per day until completion. The tenant gave written notice of unfinished work, including heating and air conditioning problems. A 2017 second amendment confirmed the lease terms and required the landlord to repair and maintain that system, which stayed inadequate until February 2020. After a trial, the Superior Court found the landlord breached the lease and the covenant of quiet enjoyment, and awarded actual damages, but not the extra $500 per day.
What the court decided
In Mittas Early Learning, LLC v. MDC Properties – Westford Rd, LLC, 104 Mass. App. Ct. 615 (2024), the Appeals Court affirmed the judgment.
The daily charge was a penalty. A liquidated damages clause is presumed valid and is usually enforced if actual damages were hard to predict when the parties signed and the agreed sum was a reasonable forecast of the expected harm. The party challenging the clause has the burden. But this clause was not really liquidated damages at all. It did not replace actual damages with an agreed estimate. It added $500 a day on top of actual damages, so the total would almost always be far greater than the real loss. Where liquidated damages are greatly disproportionate to actual damages, they are a penalty and are not enforced. SMS Fin. V, LLC v. Conti, 68 Mass. App. Ct. 738 (2007).
Actual damages were proven. Damages must be proven with reasonable certainty, not mathematical precision. The tenant’s owner estimated about $5,000 in extra utility costs over four years compared with similar centers, and about $20,000 in staff time spent monitoring contractors, based on visit logs. The court held the judge could accept those estimates and upheld the $25,000 award.
The rent amendment stood. The tenant argued the first amendment, with its higher rent, was void because the deadline was missed, and sought months of free rent. The court did not decide that question. It held the second amendment, signed after the missed deadline, confirmed and revived the amended lease. The parties’ agreed rent for January 2017 matched the higher amended rent table.
Appellate fees. The lease awarded fees to the prevailing party at every level. Because each side successfully defended part of the judgment, each could seek fees for that part of its appellate work only.
What this means for you
A big daily number in your lease may look like strong protection, but a court will not enforce it if it is simply stacked on top of your real losses. Your actual damages, proven with records, are what you can count on recovering.
The same penalty rule is worth knowing from the other side. If your lease makes you pay a fixed sum that has no reasonable link to the landlord’s likely loss, it is worth asking whether that charge is an unenforceable penalty. Each clause is judged on its own terms.
Signing a later amendment that ratifies the lease can also give up arguments you might otherwise have had about earlier missed deadlines.
What to do now
- Before you sign, ask that any daily charge be written as a reasonable estimate of loss that replaces actual damages, not one added on top.
- Give written notice of every unfinished item or repair problem, and keep copies.
- Track your real costs as they happen: utility bills, staff time, lost revenue and logs.
- Read any lease amendment for ratification language before signing, and get advice on what claims it may affect.
If this is your situation, call Doubleday Law at (617) 575-2006 or tell us what happened. These cases move on short deadlines.
Prior results do not guarantee a similar outcome.
