Category Archives: eviction

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.

Comments/Questions: gdn@gdnlaw.com

� 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.

Comments/Questions: gdn@gdnlaw.com

2012 Nissenbaum Law Group, LLC