Owner Can’t Enforce ‘Confession of Judgment’ Clause Against Defaulting Tenant

A tenant’s lease required it to pay minimum rent and additional rent on or before the first day of each month. Also, the lease had a “confession of judgment” clause that said that if the tenant didn’t pay its rent on time, it would admit (“confess”) that it defaulted on the lease and wouldn’t stop a court from quickly evicting it from its space. The tenant didn’t mail its April rent check on time. The owner notified the tenant that it was terminating the lease because the tenant didn’t pay the minimum rent and additional rent on time. And the owner threatened to enforce the confession of judgment clause against the tenant to evict it and accelerate its rent.

A Pennsylvania court blocked the owner from enforcing the confession of judgment clause against the tenant to evict it and accelerate its rent. The tenant was a bank serving the Asian community and had no other branches, said the court. Letting the owner enforce the confession of judgment clause would have a “devastating effect” on the tenant’s business and would cause immediate and irreparable harm to the tenant and its customers, said the court. Plus, the court noted the following: the confession of judgment clause didn’t comply with Pennsylvania law; the clause only applied to an eviction, not an acceleration of rent; the owner’s termination notice didn’t comply with the lease; and the owner never sent a 10-day default notice for the overdue additional rent, as required by the lease [Asian Bank v. 224 E. 13th St. Realty Corp.].