The Third Court of Appeals has reversed and remanded a lower court’s judgment that a landlord take nothing on his claims for damages under a commercial lease and pay the tenant’s attorney fees.

The trial court granted the tenant’s motion for partial summary judgment on the ground that a “holdover rent” clause establishing a rate of “two times the base rent which would have been payable by Tenant had the holdover period been a part of the original term of [the] Lease” was an unenforceable penalty. Because the tenant prevailed on an affirmative defense, the only issue remaining was the amount of attorney fees due under a lease provision affording that remedy to the prevailing party. Following a bench trial, the court awarded the tenant more than $60,000 in fees from the landlord.

The landlord engaged Smith Law Group, P.C. to prosecute an appeal from the final judgment. Lead counsel D. Todd Smith argued that the holdover-rent provision did not impose liquidated damages or constitute a penalty, but instead simply stated an agreed-upon rental rate in the event the tenant held over after the lease ended. The Third Court agreed and further concluded that the tenant was not entitled to attorney fees. The appellate court reversed the final judgment and remanded the case for a new trial.

Khan v. Meknojiya, No. 03-11-00580-CV, 2013 WL 3336874 (Tex. App.—Austin June 28, 2013, no pet.) (mem. op.) (slip opinion available here).