Today’s case is Southeastern Land Fund, Inc. v. Real Estate World, Inc., 237 Ga. 227 (1976). This case doesn’t specifically deal with landlord-tenant issues, but is the apex case in Georgia jurisprudence regarding the distinction between provisions in a contract which provide for “liquidated damages” (enforceable) versus “penalties” (not enforceable). The relevant language from the opinion is simple enough and is quoted here:
In deciding whether a contract provision is enforceable as liquidated damages, the court makes a tripartite inquiry to determine if the following factors are present: ‘First, the injury caused by the breach must be difficult or impossible of accurate estimation; second, the parties must intend to provide for damages rather than for a penalty; and third, the sum stipulated must be a reasonable pre-estimate of the probable loss.’
Provisions in a lease which provide for “penalties” or “fees” instead of “additional rent” are suspect, in this author’s considered opinion. Words like “forfeit” are arguably charged and may lead to the court refusing to enforce certain provisions providing for fees to be charged to the tenant. Care should be taken to make it clear that any of these sorts of “fees” built into the lease can pass the Southeastern Land Fund test.