HERE PLAINTIFF ADEQUATELY ALLEGED A RELETTING FEE (TWO MONTHS RENT) IN A LEASE BUYOUT AGREEMENT VIOLATED REAL PROPERTY LAW SECTION 227 WHICH PROVIDES THAT IF THE LANDLORD EXPEDITIOUSLY RELETS THE PROPERTY THE OUTGOING TENANT MAY OWE NOTHING AT ALL; PLAINTIFF SUCCESSFULLY ALLEGED THE RELETTING-FEE CLAUSE VIOLATED THE COVENANT OF GOOD FAITH AND FAIR DEALING (FIST DEPT). ​

The First Department, reversing (modifying) Supreme Court, determined plaintiff adequately alleged the reletting fee (two months rent) in a lease buyout agreement violated the Real Property Law and thereby violated the covenant of good faith and fair dealing:

… Real Property Law § 227-e expressly provides, “Any provision in a lease that exempts a landlord’s duty to mitigate damages under this section shall be void as contrary to public policy.” Under Real Property Law § 227-e, if a landlord’s reletting efforts succeed expeditiously, a tenant may not owe anything at all, as plaintiff alleges should have been the case here.

At this stage the allegations are sufficient to sustain plaintiff’s claim that the lease’s reletting fee and the lease buyout agreement violate Real Property Law § 227-e, which, if established, would constitute a breach of the covenant of good faith and fair dealing. The covenant, implied in all New York contracts, requires the parties to avoid doing “anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract” and includes all “promises which a reasonable person in the position of the promisee would be justified in understanding were included” … . As the amended complaint adequately alleges, a promise not to charge amounts barred by Real Property Law § 227-e is among those promises. Desai v Ninety Five Wall St. LLC, 2026 NY Slip Op 06198, First Dept 10-22-26

Practice Point: Real Property Law section 227 provides that if a landlord successfully relets the premises expeditiously, the outgoing tenant may owe the landlord nothing. Therefore a lease buyout agreement which requires a reletting fee (two months rent) may impose a charge barred by Real Property Law 227 and thereby violate the covenant of good faith and fair dealing.