Late fees, broker commissions, and interest timing – the court found it all wrong
An Indiana appeals court has corrected how a trial court calculated damages when a commercial tenant defaulted on a lease.
On April 23, 2026, the Court of Appeals of Indiana decided a commercial lease dispute out of Whitestown that started with missed rent payments and ended with a $3.5 million damages award being sent back for recalculation.
The story goes like this. In January 2021, CPUS Anson Building 8A, LP leased industrial space to Tradewinds Holding Company, Inc. The lease term ran from February 1, 2021, through February 28, 2026. Tradewinds was on the hook for monthly base rent plus additional rent covering taxes and operating costs, all due on or before the first of each month. Miss the payment by more than five days and you get hit with a five percent late fee on the overdue amount, plus interest at eighteen percent a year.
Tradewinds stopped paying in April 2022. Anson sued in August 2023. The parties reached an agreement on possession, and Tradewinds vacated the premises in October 2023. Anson then secured a replacement tenant, Rockwell Automation, which took possession starting February 2024.
The trial court granted partial summary judgment in favor of Anson on the breach claim. After a damages hearing, the court awarded Anson $3,559,407.17, plus post-judgment interest at the statutory rate, attorneys' fees, and costs. That figure included $2,585,984.93 in rent from April 2022 through February 2026 with a five percent late fee and operating expenses for every month except May 2022, $1,070,062.97 in recovery, repair, and reletting expenses, and $2,319,686.29 in interest compounded monthly at 1.5 percent from April 2022 through December 2024. The court also added $4,880.67 in unpaid utilities and then subtracted $2,421,207.70 in collected and expected rent from Rockwell.
The appeals court upheld the finding that Tradewinds breached the lease. Tradewinds' own designated evidence confirmed it owed at least some unpaid rent. Its owner, Brian Cook, acknowledged in an affidavit that approximately half the amount Anson alleged as unpaid had been paid, but Tradewinds did not dispute that its failure to pay the remainder was a default under the lease. Tradewinds argued that the parties had been in discussions about assigning the lease during the summer of 2023, but the court found nothing in the lease's assignment provisions that released Tradewinds from its obligation to continue paying rent during that process. The lease also gave Anson sole discretion to void any assignment attempted while Tradewinds was in default.
On damages, however, the appeals court found several errors.
The trial court treated all rent and reletting costs as if they became due in April 2022, the date of Tradewinds' first missed payment. The appeals court said the lease did not support that reading. Under the contract's remedy provisions, rent accelerated upon the landlord's re-entry, not upon the first default. The court determined that re-entry occurred in October 2023, when Tradewinds vacated and Anson retook possession. That is an eighteen-month difference, and with interest compounding at eighteen percent a year, it substantially affected the total.
The same timing error applied to the $1,070,062.97 in repair and reletting costs. The trial court treated that amount as if it were due in April 2022, even though those expenses had not yet been incurred. The appeals court held that while Tradewinds became liable for those costs upon re-entry in October 2023, each cost was only chargeable when it was actually ascertained, not as a single lump sum before the amounts were known.
Within those reletting costs, the trial court had included $695,992.50 in rental allowance that Anson gave Rockwell for improvements. Tradewinds argued the allowance should be prorated because only about two years of Rockwell's five-year lease overlapped with the balance of Tradewinds' term. The appeals court disagreed, noting that the lease explicitly allowed Anson to relet the premises for a term exceeding the balance of Tradewinds' lease and stated that Tradewinds would be liable for all reletting costs, including rent concessions, without limitation. The full allowance stood.
The court did side with Tradewinds on broker commissions. The reletting costs included $321,464.99 in commissions – $85,462.13 for Anson's broker and $236,002.86 for Rockwell's broker. However, Anson's written listing agreement with its broker had expired on November 18, 2023, and Rockwell did not sign its lease until December 20, 2023. Indiana law requires commission agreements for real estate to be in writing. Without a valid written agreement in place at the time Rockwell signed, Anson had no legal obligation to pay those commissions. Anson itself conceded this point. The court found the payments were voluntary and could not be charged to Tradewinds. The total repair and leasing costs had to be reduced by $321,464.99.
The court also corrected how mitigation was applied. Anson found a replacement tenant, which is exactly what a landlord is supposed to do. But instead of crediting Rockwell's rent against Tradewinds' balance when Rockwell actually started paying in February 2024, the trial court accumulated all the interest and late fees on the full balance first and only subtracted the Rockwell rent at the very end. The appeals court held that mitigation must be applied to offset damages at the time it becomes effective. Tradewinds was entitled to have its balance reduced starting February 1, 2024, when Rockwell took possession and became obligated to pay rent.
Late fees took a hit as well. The trial court had added a five percent late charge to every month of rent from October 2023 through February 2026 and then accelerated that total. The appeals court found this improper. Under Indiana case law, a late fee is meant to compensate a landlord for the inconvenience of collecting late rent and the loss of use of rental income, and it carries an expectation that payment is still coming. Once rent has been accelerated and the landlord can calculate the actual loss, the late fee no longer serves that purpose and becomes an unenforceable penalty. After acceleration, the landlord's loss is measured by the interest on the unpaid balance, not by recurring late fees.
The eighteen percent default rate for interest was not contested by either side. However, because the dates on which various amounts became due had been corrected, the interest calculations needed to be redone.
The appeals court affirmed the breach finding and reversed the damages award, sending the case back to the trial court with specific instructions. Pre-re-entry rent is to be calculated on a monthly basis with interest accruing at the default rate. All rent owed and ascertainable from October 2023 through February 2026, excluding commissions and late fees, is to be added to Tradewinds' balance as of October 2023. Repair and reletting costs are to be added as they are ascertained. Interest at the default rate continues to accrue until February 1, 2024. At that point, the total amount of Rockwell's rent is to be calculated and immediately deducted from the balance. Interest then resumes on the adjusted balance and continues through the date of judgment. Post-judgment interest at the statutory rate attaches after that.
For anyone working in commercial real estate or financing properties with commercial tenants, this case is a practical reminder. The language of a lease, especially the remedy provisions, will be read closely when things go wrong. How acceleration is triggered, when mitigation credits apply, whether broker agreements are current, and how late fees interact with acceleration can all shift a damages figure by hundreds of thousands of dollars. If you are on the lending side and evaluating the risk profile of a commercial lease, these are the kinds of details that end up mattering.
