I live in New York City. I am moving to another state soon and want to terminate my lease; I have just finished one year of a two-year lease. My landlord has informed me that I must pay "liquidated damages" in the amount of one month's rent to terminate the lease. There is no liquidated damages provision in my lease, and I have already found a substitute tenant who earns a substantially higher income than I do and who has a good credit history. Is this liquidated damages provision legal?
The term liquidated damages has nothing to do with Manhattans, even in New York. It refers to a fixed amount of damages expressly stipulated as the amount to be recovered if there is a breach, such as early termination. If there is no liquidated damages clause in your lease or rental agreement, the landlord cannot create such a penalty after the fact.
However, that does not take you completely off the hook for damages. Courts differ as to whether a residential landlord is required to "mitigate" damages by rerenting the apartment. New York City judges -- the one group that blends in with the surrounding residents while wearing those black robes -- tend to require landlords to make diligent efforts to find new tenants. But those judges also tend to permit landlords to recover any costs that directly result from a tenant's early termination.
If you refuse to pay the so-called liquidated damages penalty your landlord seeks, he or she may well sue you for money damages resulting from the early termination, such as brokerage fees, credit check fees, and lost rent. Presuming that the tenant you found as a cheap substitute for yourself is actually creditworthy and ready to occupy the unit the day after you move out, those damages should be minimal.
Go for a commonsense approach if at all possible. You might offer to pay the landlord for any actual and verifiable costs that result from your early departure -- as long as those costs are reasonable and less than the month's rent for which your landlord is attempting to ding you.