Category Archives: commercial real estate

What are the Requirements for a Business to Recover Damages Under the Theory of Quasi-Contract?

May an architect who draws up plans at the request of someone considering a land purchase recover the reasonable value of the services, if there is no written contract.  That was the issue before the Court in Israel Design Group v. Chabad of the Shore, Superior Court of New Jersey, Appellate Division, Docket No.  A-6008-11T3 (July 9, 2013).

In that case, the plaintiff was an architectural firm which developed plans for a synagogue.  The synagogue had requested the plans because it was considering purchasing property for expansion.  There was no contract; nevertheless, the parties did not dispute that the plaintiff had provided the plans.

The Court determined that, even though there was no written contract, the plaintiff would be permitted to recover under the doctrine of quasi-contract. “Quasi-contractual liability ‘rests on the equitable principle that a person should not be able to enrich himself unjustly at the expense of another.’” Wichert Co. Realtors v. Ryan, 128 N.J. 427, 437 (1992).

While this common law theory is not something that serves as a substitute for a contract, it is a useful tool for those asserting a damage claim in the absence of a written agreement.

© 2014 Nissenbaum Law Group, LLC

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

Does a Homeowners’ Association’s Sign Prohibition Trump Residents’ Free Speech Rights?

In Mazdabrook Commons Homeowners Assn v. Khan, 210 N.J. 482 (2012), the New Jersey Supreme Court recently held that a homeowners’ association’s rules that banned the posting of political signs on property owners’ residential units was unconstitutional.

In that case, Wasim Khan (Defendant) was a resident of Mazdabrook Commons, a planned townhouse community that was managed by a homeowner’s association, (Plaintiff). When Defendant ran for town council, he posted at his private residence two signs in support of his candidacy. Plaintiff notified
him that the signs violated the association’s rules and ordered him to remove them.

Plaintiff brought suit in the Superior Court, Law Division, Special Civil Part (Lower Court) based upon an objection it had to the Defendant’s rose garden. Defendant filed a counterclaim against Plaintiff, claiming that its sign restrictions violated his free speech rights under the New Jersey Constitution (State Constitution). The Lower Court dismissed Defendant’s counterclaim and held that the sign restrictions did not violate his constitutional rights. Id. at 489.

Defendant appealed to the Appellate Division of Superior Court of New Jersey (Appellate Court). The
Appellate Court explained that the sign restrictions were not content-neutral; favored commercial speech; and foreclosed an entire type of communication that had long been recognized as significant. Accordingly, it held that Plaintiff’s sign restrictions were unconstitutional. Id. at 489-490.

Shortly thereafter, Plaintiff appealed to the New Jersey Supreme Court (Court). Plaintiff argued that a private residential community did not violate free speech rights by the enforcement of rules agreed to by all
unit owners. Plaintiff cited the fact that the unit owners received various documents in connection with the purchase of their townhome. Those documents restricted the posting of signs. Id. at 487.  For example, the document entitled Rules and Regulations specified that [n]o signs of any kind will be placed in or on windows, doors, terraces, facades or other exterior surfaces of the buildings or Common Facilities Id. at 488.

In its analysis, the Court explained that the State Constitution guarantees individuals a broad, affirmative right to free speech.  Id. at 492. The Court quoted the relevant portion of the State Constitution as follows:

[e]very person may freely speak, write and publish his sentiments on all subjects, being responsible for the abuse of that right. No law shall be passed to restrain or abridge the liberty of speech or of the press.  

 N.J. Const. art. 1.6; Id. at 492.

The Court noted that the affirmative guarantee in the first sentence of that provision offers greater protection than the First Amendment. The First Amendment bars the government from restraining speech. However, in New Jersey, an individual’s affirmative right to speak freely, in certain situations, is protected not only from
unreasonably restrictive and oppressive conduct by the government, but also from private entities. Id. at 493.

Next, the Court applied the three-factor test outlined in State v. Schmid, 84 N.J.  A. 2d 615 (1980), to determine the parameters of free speech rights on privately owned property. Under that test, courts considered the following three factors:

(1) the nature, purposes, and primary use of such private property, generally its normal use;

(2) the extent and nature of the public’s invitation to use that property; and

(3) the purpose and the expressional activity undertaken upon such property in relation to both its private and public use.

  Id. at 494.

Furthermore, the Court applied the balancing test laid out in Coalition Against War in the Middle East v. JMB Realty Corp., 138 N.J. A. 2d 757 (1994). In that case the court considered not only the three-factor test, but also applied a balancing test. That test required the Court to weigh a private property owner’s interest in controlling activities on their property against the limited and important free speech right sought. Id.

Factor One

The Court applied the three Schmid factors. In regard to the first factor, it explained that Plaintiff was a common-interest community. The nature of the property was distinguishable from other forms of real property because there was a commonality of interest. Thus, owners had to comply with certain common
restrictions for the overall benefit of the development.  Id. at 499.

Factor Two

In regard to the second factor, the Court explained that the property was not public because there was no broad invitation to travel to, or shop in, the development. On the other hand, the importance of the second
factor was muted due to the fact that Defendant was not an outsider or visitor; rather, Defendant was the owner of the restricted property.

Factor Three

In its analysis of the third factor, the Court stated that Plaintiff restricted political speech which lied at the core of our constitutional free speech protections. Further, it explained that free speech protections assumed particular importance in the context of a person campaigning for public office.

Candidates have a constitutional right to engage in discussion of public issues and to vigorously and tirelessly advocate their own candidacy. Accordingly, the Court held that factor three favored Defendant because Plaintiff’s sign restrictions prevented Defendant from advancing his own candidacy for Town Council by posting signs at his residence. Id. at 499-500.

The Balancing Test

Further, the Court stated that Plaintiff’s sign restriction was a near-complete ban on residential signs. On the contrary, Defendant’s use of his signs constituted only a minimal interference with the Plaintiff’s property or common areas since they were placed on his own private residence. Therefore, the Court determined that Defendant’s right to promote his candidacy outweighed the relatively minor interference his conduct posed to the private property interest. Id. at 500-501.

Accordingly, the Court held that Plaintiff’s sign restrictions were unreasonable and in violation of the State Constitution.  As such, it deemed the documents that memorialized the sign restrictions unenforceable. However, the Court did reaffirm an association’s power to adopt reasonable time, place, and manner
restrictions to serve the community’s interest. Id. at 507.

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2013 Nissenbaum Law Group, LLC

Can A Lessor Disregard An Exclusivity Provision In a Lease Agreement After the Lessee has Defaulted?

An exclusivity provision is a provision that bars a lessor from leasing a rental unit to an establishment that competes with the existing lessee. There may be circumstances in which a lessor or owner may disregard an exclusivity provision in its lease agreement when the lessee or tenant defaults in its lease payments.

In BG Monmouth, LLC., v. Sue’s Frozen Yogurt, Inc., et. al., No. A-2020-10T4 (N.J. Super. Ct.
App. Div. August 3, 2012), the Appellate Division of the Superior Court of New Jersey considered this issue. That case concerned the circumstances under which an exclusivity provision was rightfully abandoned.

The Plaintiff was the owner (Owner) of a shopping complex and shared a lease agreement with the Defendant, Sue’s Frozen Yogurt (Defendant, or Renter). The Defendant operated several food service establishments in Plaintiff’s shopping complex. Defendant’s establishments primarily served hot dogs, bagels, ice cream, and frozen yogurt. The lease agreement between the Plaintiff and the Defendant included an exclusivity provision that barred the Plaintiff from renting units in the shopping complex to proprietors that competed with the Defendant by providing primarily similar menu items. Id. at 2-5.

Though Defendant operated several food establishments in Plaintiff’s shopping complex, Defendant proved consistently tardy in paying rent and eventually left defaulted payments uncured. Plaintiff sent several letters to Defendant warning of the potential breach of the lease. Id. at 14.

The dispute escalated when Plaintiff granted a lease to Amazon Cafa food establishment that provided
menu items very similar to those of Defendant. Id. at 7. Defendant argued that Plaintiff breached the exclusivity provision found in its lease agreement. The exclusivity provision read as follows,

Provided the Lessee has not been in default hereunder and Lessee is operating the Demised Premises as a restaurant featuring hot dogs, ice cream, bagels, yogurt, and frozen yogurt, then Lessor agrees not to lease any space in the Shopping Center to any tenant whose primary business is either the sale of hot dogs, ice cream, bagels, yogurt and/or frozen yogurt.

Id. at 13.

In its decision, the Court began with the legal doctrine that [w]here the terms of a contract are clear and unambiguous there is no room for interpretation or construction and the courts must enforce those terms as written. Id. at 11.

In this case, the terms of the exclusivity provision clearly stated that it would only be enforced [p]rovided
the Lessee has not been in default hereunder. However, since the lessee was in default (by not paying rent), the Court held that the lessee could not enforce the exclusivity provision.

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� 2013 Nissenbaum Law Group, LLC

How Should You Structure a Settlement So That You are Not the Subject of Sanctions?

In Repole v. Gawrysiak, A-1602-11T4 (N. J. Super. Ct. App. Div. August 8, 2012), the Appellate Division of the Superior Court of New Jersey upheld the decision of the Law Division of the Superior Court of New Jersey to grant counsel fees to plaintiffs William and Maria Repole (Plaintiffs) for Danielle Gawrysiaks (Defendant) (jointly Parties) continued failure to adhere to prior orders. 

In that case, Defendant appealed the Law Division’s decision to grant the attorney fee award to Plaintiff.
The award was granted after Defendant repeatedly failed to comply with deadlines set in numerous motions enforcing a prior settlement between the Parties. Originally, Plaintiffs commenced a lawsuit against Defendant and their neighbor, seeking damages for alleged property damage and trespass. Ultimately, the litigation settled. Under the terms of the settlement, Plaintiffs were responsible for conveying a piece of their property to Defendant.  Id. at 2.  In return, Defendant was responsible for removing an existing masonry wall and replacing it with a new retaining wall.  Id.

After Defendant delayed construction of the wall, Plaintiffs filed three (3) separate motions seeking enforcement of the settlement.  Each time a new order was entered a new deadline was set for when the wall needed to be completed; Defendant missed the deadline each time.  Defendant also failed to pay the counsel fee imposed during Plaintiffs’ second motion.  As a result of Defendant’s noncompliance, the Court entered a final order enforcing the prior orders, imposed sanctions and granted additional counsel fees.  Id. at 2-3.

Defendant moved to vacate the sanctions and for reconsideration of the counsel fee awards.
Although the awards of sanctions were vacated, the Judge stated that the counsel fee awards related not to the settlement of the underlying litigation, but rather . . . defendant’s continued failure to comply with prior orders. Id. at 4. Additionally, the Judge reasoned that counsel fees were warranted because the attorney’s services were necessary to secure defendant’s compliance with the settlement. Id.

The bottom line is that you can cause yourself harm by failing to cooperate with settlement terms.
It is in your best interest to negotiate terms that you are capable of satisfying. Indeed, when you fail to comply with settlement terms, the result can involve even more cost to you. For example, in this case, the counsel fees were not initially included in the settlement.  It was not until the Defendant repeatedly failed to adhere to his side of the deal hashed out between the Parties, that attorney fees and sanctions were included as a form of penalty.

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2013 Nissenbaum Law Group, LLC

What Constitutes Constructive Eviction For A Commercial Tenant?

When has a landlord materially deprived its commercial tenant of an expected and intended use of a premises, as required for constructive eviction?  The Supreme Court of New York, Appellate Division for the First Department recently addressed this question.  Pacific Coast Silks, LLC v. 247 Realty, LLC, 76 A.D.3d 167 (N.Y. App. Div. 2010).

In that case, a commercial tenant could not use the premises because the elevator was not functioning  for a seven week period. The court recognized that under certain circumstances, an elevator outage for that long could result in a constructive eviction.

The court set forth the elements necessary to establish constructive eviction as follows:

A tenant need not prove physical expulsion, but must prove wrongful acts by the landlord that substantially and materially deprive the tenant of the beneficial use and benefit of the premises. [citation omitted]

Id. at 172

In its holding in favor of the landlord and against the tenant, the court noted that no evidence was submitted concerning the deleterious effect it had on the tenant. The mere fact that the elevator was not functional was inadequate; there had to also be a showing that it impaired the tenant’s use of the building in a manner that was sufficient to establish a constructive eviction. In other words, that the tenant was unable to access the premises as it needed to during that seven week period. Id. at 173.

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2012 Nissenbaum Law Group, LLC