Mackenzie, J.c.c. (temporarily assigned).
By cross-motions for summary judgment in this landlord-tenant dispute the court is asked to determine whether a provision in a residential lease providing for a variable percentage payment to the landlord in the event of early unilateral termination by the tenant constitutes an enforceable liquidated damage clause or an unenforceable penalty. The resolution of this novel issue requires consideration of case law dealing with the liquidated damage-penalty clause dichotomy as well as the combined impact of Sommer v. Kridel , 74 N.J. 446 (1977), and the Security Deposit Act, N.J.S.A. 46:8-19 et seq.
Plaintiff (landlord) sues for rent due, contractual damages and counsel fees under a written lease. Defendants (tenants) defend and seek statutory double damages and
counsel fees for wrongful withholding of their security deposit. N.J.S.A. 46:8-21.1. There being no genuine contested issue of material fact, this matter is ripe for determination on cross-motions for summary judgment. R. 4:46-2, as made applicable by R. 6:6-1.
On October 25, 1976 plaintiff, trading as Lindsley Arms Apartments, rented a garden apartment unit in Morristown to tenants Peter Testa and Louise Testa under a written lease for a term (expiring October 31, 1977) of one year at the monthly rental of $290. Contemporaneously, tenants delivered to their landlord a security deposit of $435. Anthony Testa signed the lease as guarantor. In addition to the usual definition of reciprocal duties as between landlord and tenant, the lease contains a formula by which the parties purported to fix compensation to the landlord in the event of early termination by tenant. The disputed unnumbered paragraph reads as follows:
EARLY TERMINATION. Lease may be terminated as of the last day of any calendar month by written notice at least 60 days before such termination date and the payment of a consideration equal to 25% of the rents remaining to be paid between the early termination date and the termination date of the lease. Rent is not a consideration and is to be paid for every month of tenancy.
The tenants took occupancy and paid rent only through the month of December. On or about January 4, 1977 they gave written notice of their intention to vacate the apartment. No rent was paid for January. The tenants moved out toward the latter part of that month, having given less than 60 days notice. Their decision to move out was unilateral and admittedly not consented to by the landlord. The landlord re-rented the apartment effective February 8, 1977 at a monthly rental which was at least equal to defendant's rent. Interest on the security deposit amounting to $5.01 had accrued by that date. The security deposit was not thereafter returned to defendants, nor was a written statement itemizing deductions from and withholding of
the security deposit timely delivered or mailed by certified or registered mail to tenants.
It is clear that the tenants breached the lease by moving out without either consent of the landlord or legal cause. No other conclusion is possible on these facts. As a result, plaintiff has suffered actual damages for the period of January 1, 1977 to February 8, 1977 during which no rent was paid. In addition to the unpaid rent plaintiff calculates his damages, using the early termination formula, as follows:
$290.00 unpaid rent for January 1977
72.45 unpaid rent for the first eight days of February 1977
634.97 liquidated damages*fn1