Category Archives: Landlord/Tenant

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

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.

Comments/Questions: gdn@gdnlaw.com

2012 Nissenbaum Law Group, LLC