Egregious Price Increases

You heard about Epipen, the “price of which has climbed sixfold over the last several years. At drug price-comparison website GoodRx, the cheapest price today is $614 for a package containing two, or more than $300 per EpiPen, up from about $100 for two.”

Now there’s Amtrak. The company just raised the prices for renting backyard spaces underneath the Hell Gate Bridge in New York from, in one case, $25 to $25,560 a year (that’s not a typo) and, in another, from $50 to $45,000 a year.

The homeowners that rent these “additional” spaces have been given 30 days to accept the new leases or else give up the land. Some use it for recreational purposes but others rent it out as parking lots, which has allegedly caused Amtrak to reconsider these contracts. The company has confirmed the rent hikes, stating that “some lease holders have not seen an increase in more than 70 years” and that renters can still expect to pay only “a fraction (less than 1 percent) of the fair market rental rates.” Amtrak will be “working with each person individually to determine the exact terms of their lease.”

Is this fair? Many of the renters have decks, pools, and established plants on the land. They also clear snow, remove falling bricks and other debris from the land. They’ve been able to enjoy the land for years, perhaps creating a reasonable “course of performance” expectation that the rents would not be increased to such a high extent.

On the other hand, the rent is exceptionally low for New York and has not been increased for many decades. Then again, if the intent of these contracts was for them to serve mainly recreational purposes, what about people that now convert the land into commercial use (parking lots, of all things)? Does that matter?

This case raises interesting issues of contract interpretation, unilateral contract modification, good faith obligations by both parties, etc. It seems to me that Amtrak might, depending on the wording of these contracts, be able to now increase the rent somewhat, but to the extent done here, the intent seems to be an arguably contractually impermissible penalty rather than, perhaps, a good-faith renegotiation of contract terms.

Hat tip to Shubha Ghosh for alerting my attention to this issue.