Category Archives: commercial real estate law

What is a Quit Claim Deed and How is it Used?

How do you sell something you don’t know if you own? That may sound like a nonsensical question, but there are many situations in which it comes up under the law.

The typical example is with respect to real estate. Many times the real estate records do not tell the whole story about who has an interest in the property. Sometimes there is a dispute about ownership. Other times people may have proprietary rights that are not necessarily related to actual ownership of the land, but instead may relate to how it is used (or restrictions on that use).

The law has come up with a way of dealing with such situations. It is called a quit claim conveyance. It means that the person will convey whatever interest they may have, whether or not they can define it.

One of the more interesting ways this is currently used has to do with the assignment of intellectual property. Often someone might be involved in a group project that results in creating a trademark, copyright or other such property rights. In such a situation the parties will often create a company that they jointly own and have everyone sign a quit claim transfer assigning any rights they may have, known or unknown, to that company.

A quit claim conveyance or transfer is a powerful tool for those involved in legal situations that may involve a level of obscurity or ill-defined rights.

Can a Tenant Pay Rent in Advance and Then Stop Payment on the Check if He Decides to Terminate the Lease?

If a lease provides for a rent due date and the rent is paid in advance, is it reimbursable if the lease is thereafter terminated? That issue was considered by the New York State Court of Appeals in Eujoy Realty Corp. v. Van Wagner Communications, LLC 2013 WL 6164508 (Nov. 26, 2013).

In that case, the lease explicitly provided that the tenant would pay the rent in advance for a full year. The lease also provided that the landlord was not required to return any of the rent if it was terminated for any reason. In 2007, the tenant paid $96,000+ for a full year of rent in advance. However, the tenant claimed that the payment was sent in error and that it wanted to terminate the lease.

The Judge ruled that rent paid in advance is not recoverable if the lease is terminated prior to completion of the term. The exception would be if the lease were to provide otherwise. In this case, it did not.

The Court also explained that the tenant was a “sophisticated and counseled” business, and thus it could have bargained for what it wanted when drafting the lease. Therefore, the Court would not require the money to be reimbursed. 

What is Spot Zoning?

What is spot zoning? That was one of the questions before the Appellate Division of the Superior Court of New Jersey in Hal Holding, LLC v. Mount Laurel Township, Superior Court of N.J., Appellate Division, A-1340-10T2 (May 4, 2012.)
In that case, the parties were disputing whether an ordinance passed by Mount Laurel Township requiring a parcel of land to be maintained as a golf course was an invalid exercise of the Township’s authority.  One of the issues in the case was whether that ordinance constituted “inverse spot zoning.”  That is a principle of law which states that when a land use decision “arbitrarily singles out a particular parcel for different, less favorable treatment” than the less favorable ones it will be examined to see if the decision was arbitrary in nature.  Riya Finnegan, LLC. V. Twp. Council of S. Brunswick, 197 N.J. 184, 197 (2008) quoting Pen Cent. Transport Co. v. N.Y. City, 438 U.S. 104 (1978).

In Hal Holding, the Court found that there had been no inverse spot zoning. Although the ordinance “was intended to affect, only one property: the subject property [the golf course], [in order to find that there was inverse spot zoning] the zoning must also constitute arbitrary treatment. Here, given that a purpose of the ordinance ‘was to promote the continuation of open space and natural features adjacent to fully developed residential areas,’ and the subject property consisted of open space (a golf course) adjacent to fully developed residential areas the disparate treatment here is not arbitrary.” Id. at 11.

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© 2014 Nissenbaum Law Group, LLC

What is the Standard for a Property Owner to Object to a Zoning Board Decision Based on the Appearance of Impropriety?

May a property owner object to the appeal of a Zoning Board decision solely on the basis that the way the appeal was handled presented an appearance of impropriety?  This question was addressed by the Supreme Court of New Jersey in Kane Properties, L.L.C v City of Hoboken, 2013 WL 3197164 (NJ 6/26/2013). [READ CASE HERE]

In that case, plaintiff applied to the Hoboken Zoning Board to obtain the required variances to develop a twelve story high-rise. During a Zoning Board hearing, the Skyline Condominium Association, Inc. (“Skyline”), objected to the development proposal. However, the Zoning Board granted the variances to plaintiff anyway. Skyline appealed to the Hoboken City Council challenging the approval of the plaintiff’s variances.

However, an issue arose when the attorney for Skyline, Michael Kates, Esq., was appointed to serve as Hoboken’s Corporation Counsel. Although he resigned as counsel to Skyline, nevertheless, Plaintiff objected to Kates’ participation in the proceedings before the City Council respecting the same matter. Accordingly, Kates recused (separated) himself from participating in those proceedings.

The City Council considered whether to reverse the variances given to plaintiff. Although Kates was supposed to have totally recused (separated) himself from those proceedings, he did become involved in aspects of them. Indeed, as the Supreme Court would later note, “Kates acted as counsel to the governing body, he answered questions from Council members, he advised them on voting procedures, and he signed the resolution following their vote to indicate he had approved it.” Id.

Ultimately, the City Council approved the Zoning Board’s decision. Plaintiff initiated an action in the Superior Court of New Jersey challenging the city’s decision. Ultimately, the matter was appealed all the way to the Supreme Court of New Jersey.

The Supreme Court found that Kates had violated a requirement that is normally applied to Judges: whether the action or inaction evokes the appearance that there has been an appearance of impropriety. In other words, even if technically each thing he had done was not an actual conflict of interest, taken as a whole, they appeared improper.

The Court noted that normally the appearance of impropriety standard applies to Judges, but nevertheless, when the attorney is advising a quasi-judicial body, the standard can also apply to the attorney. In this case, the City Council was considering an appeal of the Zoning Board’s determination, and that put it in a quasi-judicial capacity. For that reason, Kates’ activities were covered by the appearance of impropriety standard. Since he violated it, the Supreme Court sent the matter to the Law Division of the Superior Court of New Jersey to consider it anew in light of the Supreme Court’s ruling.

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© 2014 Nissenbaum Law Group, LLC

Will a Commercial Tenant Have to Pay Rent While The Landlord Makes Renovations to the Property That Cause The Tenant to be Constructively Evicted?

In 1561 Irving, LLC v. Francisca Lopez, A-1150-10T3 (N.J. Super. Ct. App. Div. August 2, 2012), the Appellate Division of the Superior Court of New Jersey was presented with the following question: if a landlord makes renovations to commercial property that it leases, preventing its tenant from conducting business and the tenant stops paying rent, will the tenant still owe the landlord rent for that period?

In that case, defendant Francisca Lopez (defendant) appealed from a judgment by the Superior Court of New Jersey, Law Division, that awarded plaintiff 1561 Irving, LLC (plaintiff) $1155.31 for unpaid rent, late fees and court costs.  The Law Division court also dismissed defendant’s counterclaim.

Defendant signed a commercial lease with plaintiff for a term of just under two years.  As owner of the business that was a party to the contract, defendant personally guaranteed payment of all sums due and owing to plaintiff in accordance with the lease. See id. at 2.  The terms of the lease were as follows:

[defendant] was to pay $500 per month for the first year of the lease and $525 per month for the second year of the lease, together with a late charge of five percent, as additional rent, for each payment that was more than ten days late; 1561 Irving was entitled to reasonable attorney’s fees incurred to enforce the terms of the lease; and if [defendant] remained in possession of the property past the end of the lease term, the monthly rent would be 250% of the last month’s rent under the lease.

Id.

During the same month that the lease was set to terminate, plaintiff began making renovations to an apartment located above defendant’s store. In response to plaintiff’s allegation that defendant breached the lease agreement by failing to pay the rent, defendant alleged that the renovations caused her to suffer business losses in the amount of ten thousand dollars ($10,000.00) because she was constructively evicted from the premises.

During the bench trial, an employee of the property management company (employee) hired by plaintiff testified that defendant owed twenty-five dollars ($25.00) for rent because its five hundred ($500.00) security deposit was applied to the unpaid rent amount of five hundred and twenty-five dollars ($525.00).  The employee also testified that the renovations only took approximately six (6) weeks to complete and plaintiff only entered defendant’s space three different times to do plumbing work. Id. at 3.

Although defendant’s investor testified on defendant’s behalf, claiming that defendant was unable to conduct business during the renovations, the Superior Court of New Jersey, Law Division, ultimately decided in favor of the plaintiff.  Defendant was ordered to pay plaintiff the monies that was owed pursuant to the guarantor provision of the lease, and pay five hundred and fifty dollars ($550.00) in back rent, together with late fees.  The Trial Court found that the employee’s version of what happened was the accurate version, but gave defendant a three day credit for the time when the renovations interfered with defendant’s premises.

The Appellate Division found that the Trial Court carefully reviewed the evidence and made detailed findings of fact . . . [and] correctly calculated that 1561 Irving was entitled to a judgment in the amount of $1155.31, and [] correctly determined that [defendant] was personally liable as guarantor. Id. at 4-5.  Ultimately, the Appellate Court upheld the Trial Court’s findings.

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� 2012 Nissenbaum Law Group, LLC

May the Owner of a New York Co-op Apartment be Evicted When He No Longer Owns Shares in the Co-op?

In Emigrant Mtge. Co., Inc. v. Greenberg, NY Slip Op 50387(U) (D. Nassau County, 1st District March 8, 2012), the court considered a very important issue for co-op owners: whether the co-op owner could be evicted if he no longer owned his shares in the co-op itself.

The difference between owning a co-op and owning a condominium is that the co-op owner is given shares in the cooperative itself.  On the other hand, the condominium owner is given a deed for the actual apartment that he purchases.

In the Emigrant case, the co-op owner pledged his stock as collateral for a debt.  He defaulted and the creditor obtained the stock.  The question was whether that also allowed the creditor to evict the former owner.

The Emigrant court first held that it had jurisdiction to evict the former co-op owner, notwithstanding the fact that the co-op itself (as opposed to the stock) was not owned by him.  Even though the actual ownership solely involved stock, not realty, the court cited a number of cases that indicate that the ownership of stock in a co-op is effectively the same as ownership of real estate.

The court cited such examples as the fact that the sale of a co-op has been held to require writing under the Statute of Frauds, because it is a conveyance of realty.  See Statute of Frauds (General Obligations Law 5-703); Maloney v. Weingarten, 118 AD2d 836, 837, 837, 500 N.Y.S.2d 320, lv. to appeal denied, 69 NY2d 608, 516 N.Y.S.2d 1023, 509 N.E.2d 358.  Likewise, the shares of a co-op are not deemed to be securities for purposes of The Securities Act of 1933 and The Securities Exchange Act of 1934.  See United Hous. Found v. Forman, 421 U.S. 837, esp854-860, 95 S.Ct. 2051, 2061-64, 44 L.Ed.2d 621 reh. Den., 423 U.S. 884. 96 S.Ct. 157, 46 L.Ed.2d 115.

In sum, the court held [a]s between the secured party and the defaulting tenant, the secured party has a superior right to the apartment and may seek to evict the defaulting tenant when his/her interest has been extinguished. Id. at 5.

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2012 Nissenbaum Law Group, LLC

Did the NJ Department of Environmental Protection�s Refusal to Recognize a De Minimis Quantity Exemption in the Sale or Transfer of Real Estate Overstep its Statutory Authority?

Has the NJ Department of Environmental Protection (DEP) gone too far in regulating the activities of owners and/or operators of industrial establishments?  The Appellate Division of the New Jersey Superior Court recently decided that it had.  See Des Champs Laboratories, Inc., v. Robert Martin, Docket No. A-3235-10T4 (N.J. Super.Ct. App. Div. July 6, 2012).

In that case, the court held that the NJ Department of Environmental Protection had no right to bar the sale of industrial properties that had de minimis quantities of hazardous substances.  Specifically, the court found that in barring such sales, the DEP violated the Site Remediation Reform Act of 2009 and the Industrial Site Recovery Act of 1993.

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2012 Nissenbaum Law Group, LLC

Does the Environmental Protection Agency Have the Right to Assert Exclusive Authority to Regulate Certain Environmentally-Toxic Discharges on Property?

In Illinois v. Milwaukee, 406 U.S. 91, 92 S.Ct. 1385 (1972), the Supreme Court addressed the extent of the federal Environmental Protection Agency’s exclusive right to regulate discharges of toxic waste on land.  Notably, that case was cited favorably by the Supreme Court in its June 2011 opinion in  Am. Electric Power Co., Inc., v. Connecticut, __ U.S. __, 131 S.Ct. 2527 (2011).

In the Illinois case, the Supreme Court recogniz[ed the] right of Illinois to sue in federal District Court to abate discharge of sewage into lake Michigan. Illinois, 406 U.S. at 93. Importantly, in a follow up case known as Milwaukee II, the court held that amendments to the Clean Water Act displaced the common law nuisance claim allowed in the previous case. Milwaukee v. Illinois, 451 U.S. 304, 316-319, 101 S.Ct. 1784 (1981).

The importance of this holding was highlighted by the fact that it was cited this past month in the Connecticut case for the proposition that the federal government has the right to create an environmental regulatory scheme that will preclude common law claims for the same wrongful conduct. In Connecticut, court held that four private power companies and the federal Tennessee Valley Authority could not be sued for common law nuisance claims because the Clean Air Act, as enforced by the Environmental Protection Agency, superseded them. 

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� 2012 Nissenbaum Law Group, LLC

Can the Uniform Environmental Covenants Act (UECA) and the New Jersey Brownfield Act co-exist?

In 2003, the National Conference of Commissioners on Uniform State Laws (NCCUSL) drafted and approved the Uniform Environmental Covenants Act (UECA). UECA was enacted to develop a system of recording environmental covenants for contaminated real properties known as Brownfields, when such properties are remediated to a level determined by their use but retain contamination in excess of the level that would permit unrestricted use of the property. Uniform Environmental Covenants Act, N.J. L. Revision Common Reports 1, 2 (2009). Since UECA does not supplant the remediation standards or methods imposed by the regulatory agencies, it is therefore, a complement to the already existing regulatory tools. 

Although, New Jersey lacks a statute that provides for an environmental covenant per se, it has significant legislation in place to regulate Brownfields and other contaminated properties. New Jersey adopted the Brownfield Act (Act) in 1993. N.J.S. 58:10B-1. The Act, which was amended in 1997 and 2002 regulates contaminated sites once used for commercial and industrial purposes but currently abandoned or underused in order to ensure protection to the public and the environment while promoting the cost effective cleanups and reuse of such properties. Id. The Act provides for financial incentives, remediation standards, liability protection and cleanup procedures for innocent parties who clean up Brownfields. Thus, the Act provides for the use of notice and institutional controls as part of the remediation of contaminated properties. Uniform Environmental Covenants Act, N.J. L. Revision Common Reports 1, 3 (2009).

The Act provides, in pertinent part:
when real property is either remediated to a nonresidential soil remediation standard, or engineering or institutional controls are used in lieu of remediation to an unrestricted standard, the Department of Environmental Protection (DEP) shall, as a condition of the use of the standard or control, require the recording of a notice indicating that contamination exists on the property at a level that may statutorily restrict certain uses of or aces to the property.

N.J.S. 58:10B-13(a)(2).

The notice is recorded in the same manner as a deed and includes:

     (1) Delineation of the use restrictions; Id.

     (2) Description of all specific engineering or institutional controls; and Id.

     (3) The property owner’s written consent to the notice. Id.

The notice of the existence of contaminants must be provided to the governing body of each municipality in which the property is located. N.J.S. 58:10B-13(a)(3). The Act also requires DEP to post signs at any site where access is restricted or where areas need to be maintained in a prescribed manner. N.J.S. 58:10B-13(a)(4). Therefore, while the Brownfield Act relies on police power for its enforcement, UECA gives this power to the private parties. The ability of parties other than the State to enforce environmental restrictions of Brownfields sites serves as an improvement to the law of New Jersey. Therefore, the New Jersey Law Revisions Commission recommended adding UECA to the New Jersey laws without displacing the Brownfield Act.

With this new change, the deed notice required by the Brownfield Act will serve as a restrictive covenant and allow enforcement by any person who is injured, or if the DEP fails to enforce the restrictions, by any person. Uniform Environmental Covenants Act, N.J. L. Revision Common Reports 1, 5 (2009). Thus, the amendments go further, in that any person whether or not a party to a restrictive covenant is given the power to enforce the restriction. N.J.S. 2A:35A-4. Also, if the DEP is acting on the problem, a private citizen must defer. N.J.S. 2A:35A-4.

Similar to the DEP’s use of independent business contractors to perform investigation and remediation, this is another aspect of New Jersey’s continuing approach to partnering with business to ameliorate environmental contamination.

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� 2011 Nissenbaum Law Group, LLC

What is Inverse Condemnation and How is it Applied When Ownership of the Land Changes?

In a recent case, the Appellate Division of the Superior Court of New Jersey addressed the difficult issues surrounding inverse condemnation. Inverse condemnation is when a property owner is deprived of all or substantially all of the beneficial use of the totality of his property by an action of the government. The reason that this is called an inverse condemnation is that it usually involves action by the government that indirectly, but effectively takes the property, rather than a formal proceeding by the government to openly and directly condemn particular property.
The inverse condemnation concept leaves a number of unanswered questions. One of them is whether a purchaser of land that was not inversely condemned can then seek a determination of inverse condemnation based upon the same circumstances as existed when the previous purchaser owned it. This question was addressed in the context of a situation in which the first owner of the property brought a claim for a hardship variance that was denied, and the new owner brought a claim for inverse condemnation regarding the same property. Was the new owner allowed to bring such a claim, or was it too late to do so?
In  Ciaglia v. West Long Branch Zoning Bd. of Adjustment, 2011 WL 5041329 (N.J.Super.,2011) the plaintiff, Caiglia, was the owner of a vacant lot located on De Forrest Plane in West Long Branch. This lot was a part of a larger tract of land prior to its subdivision in 1957. The subdivision placed the lot in a residential district whose zoning ordinance required each lot to have lot frontage of not less than 100 feet and a depth of not less than 150 feet. Id. at 1. Even though the lot did not comply with these zoning requirements, the West Long Branch Planning Board approved the subdivision and certified that the subdivision map conforms with all the laws of the state and municipal ordinances and requirements applicable thereto. Id. At some point in future, the lot was subjected to even more restrictive regulations, which required minimum lot areas of 22,500 square feet and 150 feet of street frontage. Id  
Borst, Caiglias immediate predecessor in title, obtained the title to the lot through a tax foreclosure in 1988. In 1994, Borst applied for a variance for the lot which was denied by the Board of Adjustment (Board). Borst appealed the denial, and in 1997, the Board once again denied Borst’s application. In response to this, Borst asserted a claim for inverse condemnation against the Board. Finally, in 1998, Borst dismissed the Board from the action with prejudice and six months later, the court dismissed the remainder of the action with prejudice. This is when Caiglia entered into a contingent contract to purchase the lot from Borst, and submitted a variance application seeking permission to construct a single-family home on the lot.  The Board denied the application on the grounds that Ciaglia’s proposal was the same or substantially the same as Borst’s application of 1994. Id. at 3. Ciaglia then submitted amended plans which the Board found to be substantially different from the Borst [a]pplication. Id. In spite of the differences, the Board denied the variances and indicated the possibility of approval of a smaller dwelling. Ciaglia responded by filing a complaint that sought damages for wrongful inverse condemnation from the Borough. The trial court rejected the Boards finding that Ciaglia’s hardship was self-created on the grounds that Ciaglia had met his burden of proving undue hardship and had also attempted to contact the neighboring lot owners regarding the purchase of their lots. However, the trial court affirmed the Boards denial of Ciaglia’s amended variance application on the grounds that the Board did not act arbitrarily, capriciously or unreasonably in reaching their decision.
Following this ruling, Ciaglia submitted another applicant based upon the Board’s earlier indication of the possibility of approval of a smaller dwelling. But the Board denied the variance application. In spite of this denial, Ciaglia purchased the land from Borst and then moved for summary judgment on his claim for inverse condemnation. The Borough filed a cross-motion for summary judgment asserting that:
     (1)   Ciaglias hardship was self-imposed; and
     (2)   The action for inverse condemnation was barred by the statute of limitations. Id. at 4.
The motion judge held that the subdivider’s 1957 application for a substandard lot constituted a self-imposed hardship, and this self-imposed hardship was imputed to the successors of the lot, namely Ciaglia. Id Therefore, Ciaglia was disqualified from inverse condemnation relief. Furthermore, the motion judge held that Ciaglia was not barred by the statute of limitations but later amended his opinion and held that the statue of limitations had expired.
Ciaglia appealed and the Appellate Division held that Ciaglia was entitled to relief for his claim of inverse condemnation. In arriving at its decision, the Court first looked at the underlying constitutional principles that prohibit governmental takings of private property without paying just compensation. The Takings Clause of the Fifth Amendment of the United States Constitution bars taking of private property for public use without paying just compensation. U.S. Const. Amend. V. The Takings Clause is made applicable to the States by the Fourteenth Amendment. Ciaglia, 2011 WL 5041329 at 5. The New Jersey Constitution provides protections against governmental takings of private property without just compensation, coextensive with the Takings Clause of the Fifth Amendment of the United States Constitution. Id. The taking can be physical (e.g., deprivation of access, land seizure) or it can be a regulatory taking (when government regulations deprive the property owner of all economically viable use of land). Id. A property owner who is deprived of all or substantially all of the beneficial use of totality of his property can bring a claim for inverse condemnation. Id.
The Court held that due to the fact sensitive nature of the action for inverse condemnation, its adjudication must be individually tailored to the particular circumstances at the time the claim is presented. Id. at 7. The Court stated that at any time, Borst could have submitted a completely different variance application that would not be barred on land use res judicata grounds. Id. Similarly, Ciaglia could have made subsequent submissions that would not be barred by land use res judicata. Therefore, the Court held that Borst’s dismissal of his inverse condemnation claim with prejudice did not bar Ciaglia from bringing an independent cause of action for inverse condemnation.  The Court also held that the availability of hardship variance depends always on how the hardship was created, not on who suffers from it at the time of application for a variance. Id. at 8. Furthermore, the Court disagreed with the Board’s contention that the hardship was self-created because the Planning Board approved the subdivision map with its eyes wide open and in conformity with existing law. It also imposed more restrictions on the lot, thereby zoning the lot into idleness. Id
Therefore, Ciaglia was entitled to a judgment requiring the Borough to commence procedures for acquisition of the lot pursuant to the Eminent Domain Act of 1971.

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2011 Nissenbaum Law Group, LLC