Norris, McLaughlin & Marcus

Posts Tagged ‘landlord’

Consent Judgments: Not Always What They Appear To Be

On many occasions, a commercial landlord and a tenant who find themselves in court together will enter into a consent judgment as a means to resolve their dispute in order to avoid the time and expense of a trial. The courts provide basic consent judgment forms that the parties may revise to fit their specific situation. A consent judgment will usually contain payment terms with which the tenant must either comply or risk eviction. It may also include other terms covering the tenant’s non-monetary obligations. If the tenant defaults, it usually means the tenant will be evicted. I say “usually” because consent judgments are viewed by many courts as being a hybrid between a traditional judgment and a settlement agreement. Settlement agreements are strongly favored in New Jersey as a means of resolving disputes. Many of our courts are overburdened and understaffed, making settlement of lawsuits highly desirable as a means to preserve judicial resources.

What happens if you have a consent judgment and the tenant fails to make a payment? Most times, the landlord will simply submit a certification to the court detailing the tenant’s default and requesting the issuance of a warrant of removal. The warrant is issued and, ultimately, the tenant is evicted. That’s a clear case. There are situations that arise, however, where the tenant defaults, but then quickly moves to cure the default by making the necessary payment. Nevertheless, the landlord has a vested interest in enforcing its rights under the consent judgment. In New Jersey, if you sleep on your rights there is a good chance you will lose them.

How do courts deal with these situations? The court will look not only at “excusable neglect” (the standard that will be applied in determining whether to vacate a warrant of removal), but also at whether the tenant has cured its default and, in essence, substantially complied with the terms of the consent judgment. Unlike a situation involving enforcement of a traditional judgment, if the tenant has substantially complied with the terms of the consent judgment and cured the default, the court may be less likely to evict the tenant. In making its determination, a court will 1) consider any prejudice accruing to the landlord as a result of the default; 2) apply concepts of equity to its analysis; and 3) ultimately exercise its legal discretion in determining whether to enforce the consent judgment against the defaulting tenant. Because “equity” is involved in the analysis, a court may be less eager to strictly enforce a consent judgment where the tenant has cured its default, and prejudice to the landlord is minimal.

No Good Deed – Realtor Exposure Under FDCPA For Attempting To Collect Rent

A New Jersey Federal District Court recently refused to dismiss a plaintiff’s claim under the Fair Debt Collection Practices Act (FDCPA) brought against a realtor who took steps on behalf of the landlord-client to try and collect overdue rent from the plaintiff.

What happened to the plaintiff in this case seems rather draconian. Apparently, plaintiff was approximately 10 days behind on her rent. At or about that time, plaintiff, who was a US Army officer, had received a mobilization order that included an annual salary of $84,000.

The real estate agent, on behalf of the landlord, contacted plaintiff’s military superiors and advised them plaintiff was late on the rent. Based on information supplied to them by the realtor, plaintiff’s superiors revoked her mobilization along with the accompanying $84,000 salary.

When plaintiff sued both the landlord and the real estate broker under the FDCPA, the broker moved to dismiss, arguing that she was not a “debt collector” as defined under the FDCPA. The FDCPA defines a debt collector as

“Any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due, or asserted to be owed or due to another.”

While the broker’s liability has yet to be decided, the court ruled that plaintiff had the right to conduct discovery to determine whether the broker was a “debt collector” under the FDCPA.

While it appears the broker may have been attempting to better service the landlord-client, the better practice is to have the landlord collect its own debt. In that instance, the FDCPA would not apply. Any broker who feels compelled to try to collect rent on behalf of a landlord-client should first become fully conversant with the sometimes labyrinthine provisions of the FDCPA, and then fully adhere to its requirements. Those who fail to do so could very well find themselves enmeshed in expensive litigation in their Federal District Court.

Anatomy Of A Tenancy Trial

If you are a commercial landlord, then chances are you have a relatively good relationship with your tenants. However, there are instances where a landlord and one of the tenants fall into a toxic relationship, or the tenant simply runs into financial difficulties resulting in nonpayment of rent, forcing the landlord to file an eviction action.

What can a landlord expect to have happen at the trial?

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Landlords Are Not Guarantors

Judge Mahlon Fast, J.S.C., a recognized expert in Landlord/Tenant law in New Jersey, recently issued an opinion in Gardens at Maplewood v. Fowlin, stating that a tenant whose apartment was damaged in the “Sandy Superstorm” was not entitled to a rent abatement for the period of time the dwelling is rendered less than habitable as a result of the disaster.

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The Importance of Drafting Proper Notices to Quit in a Commercial Tenancy

In an unpublished decision, issued on November 7, 2011, by New Jersey’s Appellate Division, the importance of drafting a notice to quit in accordance with the law is highlighted.  In Sanguiliano v. Walker, 27-2-4205 App. Div., Plaintiff’s summary dispossession action was based on her alleged disorderly conduct and violations of the landlord’s rules and regulations.  The dispossession action was governed by the requirements of the Anti-Eviction Act.  According to the Appellate Division, the “notice to quit” did not identify any “continued” disorderly conduct or violation of the landlord’s rules and regulations committed by defendant after her initial receipt of the “notice to cease.”  Because the notice to quit was defective, the Appellate Division ruled the trial court should have granted defendant’s motion to vacate the default judgment for possession and dismissed plaintiff’s complaint.  It reversed the judgment for possession.

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The Landlord’s Liens

I previously wrote in this blog about the distraint process available to commercial landlords in New Jersey – a sometimes cumbersome process the purpose of which is to put into the landlord’s pocket at least some of the back rent due from a defaulting tenant (see The Distress of Distraint). In addition to the distraint statutes, there are other means available by way of statutes and contract provisions to protect a commercial landlord’s entitlement to unpaid back rent. 

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Commercial Landlord Has an Implied Obligation to Maintain Shopping Center

On July 7, 2011, the New Jersey Appellate Division affirmed a trial court ruling that where a lease requires a tenant to operate a “quality jewelry store” in a “first class and reputable manner,” the landlord has an implied obligation to maintain the shopping center in a good condition.

In Wallington Plaza LLC v. Taher, the trial court concluded that while the lease obligated tenant to sell only quality jewelry, it also imposed a responsibility on the landlord to keep the premises in a reasonable condition as a tenant would expect if he had to operate a first-class business to make prospective customers welcome.  According to the tenant, during the years immediately preceding tenant vacating the premises, the shopping center’s parking lot fell into disrepair. More importantly, many key tenants closed and vacated the shopping center.  The tenant, faced with considerably reduced traffic and an unattractive setting, vacated his store.  The landlord sued for 6 months rent.

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The New Jersey Supreme Court Requires Municipality to Negotiate With Commercial Tenant Who is Sole Condemnee in Eminent Domain Proceeding

On Wednesday of last week, St. Patrick’s Day, the luck of the Irish was with a commercial tenant who happened to be a defendant in a condemnation action in which the owner’s interest in the property was not being condemned. In Town of Kearny v. Discount City, the New Jersey Supreme Court dismissed a condemnation action filed by the Town of Kearny, because its designated developer, who was also the landlord, failed to engage in bona fide negotiations with the only remaining holdout tenant, even though the lease between the landlord and tenant contained a standard condemnation clause in which it bargained away its right to receive compensation in a taking. Under such circumstances, the Court ruled that the condemning authority has an obligation to engage in bona fide negotiations with the tenant in order to arrive at “just compensation” for the taking of the tenant’s leasehold interest in the property. In doing so, a condemning authority must provide the tenant with appraisals or an explanation of the value placed on the tenant’s interest. The Court’s pronouncement was reported in the Star Ledger,  “N.J. Supreme Court gives commercial leaseholders more clout in negotiating eminent domain cases.”


How an Owner Can Spoil a Potentially Good Damage Claim

Guest Blogger: Andrew Linden

As we discussed in our prior entry, How a Commercial Landlord Can Avoid Spoiling a Potentially Good Damage Claim, a landlord/owner has a duty to preserve evidence of alleged damages to its premises in order to avoid a claim of spoliation. Shortly after we posted that entry, the Supreme Court of New Jersey addressed the issue of spoliation in a dispute between a building owner and its contractors.  Robertet Flavors, Inc. v. TriForm Constr., Inc., 203 N.J. 252 (2010), described below, provides a real-world example of how a potentially good damage claim can quickly go bad as a result of spoliation.

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The Need for Exit Strategies in Your Commercial Lease

In good times and in not so good times, a well drafted and negotiated commercial lease will contain various exit strategies available to the landlord and tenant. These strategies will come in handy in situations where a tenant’s business is booming causing it to grow out of its current space (good times) or where the space is too big or expensive for the tenant to continue because business has dropped off considerably (not so good times).

Exit strategies can include the following:

  • Assignment
  • Subletting
  • Contraction rights
  • Right to go dark
  • Right to expand

Below is a very brief overview of how each of the foregoing strategies operates.

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