Judicial Notice of COVID-19 Pandemic Held not to be a Substitute for Evidence of Mitigation of Damages
The COVID-19 pandemic has had a significant impact on the economy and has caused many businesses to struggle financially. Landlords and tenants have been navigating the challenges posed by the pandemic, including issues related to rent payments and lease obligations. In the recent unpublished case of Washington-Hudson Associates II LLC v. Town Sports International Holdings, Inc. (A-1357-21), the New Jersey Appellate Division addressed a dispute between a landlord and the guarantor of a tenant over unpaid rent and other charges under a commercial lease.
The first finding was that the lease in question did not provide for any rent abatement or reduction in the event of a pandemic or other unforeseen events. The court noted that the lease, "was clear an unambiguous in providing there would be 'no abatement, diminution or reduction' in rent for 'any inconvenience, interruption, cessation or loss of business,' caused 'directly or indirectly' by government orders. The court emphasized that the parties' contractual obligations should be enforced according to their plain terms, and required the guarantor to cover unpaid rent even though the tenant's business could not operate due to governmental orders.
Once the court found that the rent was not abated by the pandemic, the key issue in the case became whether or not the pandemic should be taken into account when determining whether or not the landlord mitigated its damages. The trial court had taken judicial notice of the pandemic and granted summary judgment, finding that "no reasonable jury could find that [the landlord] had failed to mitigate its damages because it could not have been expected to find a new tenant "in the middle of COVID when there's no vaccines."
The Appellate Division disagreed and opined that the trial court should not have taken judicial notice of the pandemic with regard to the mitigation of damages. The court found that the impact of the pandemic on the economy and on businesses was not a fact that was generally known or capable of accurate and ready determination. The court noted that the impact of the pandemic could vary depending on a variety of factors, including the type of business and the location of the business. As such, the court held that the trial court erred in taking judicial notice of the pandemic with regard to the mitigation of damages as opposed to letting the case proceed through discovery and trial to establish a record of the landlord's efforts to mitigate its damages.
In summary, this case highlights the importance of carefully reviewing lease agreements and understanding the parties' contractual obligations. It also underscores the need to seek legal advice when facing disputes over commercial leases, particularly in the context of the ongoing pandemic, as the impact of the pandemic will not be taken into account automatically in disputes over rent and other charges. Washington-Hudson Associates II LLC v. Town Sports International Holdings, Inc. (A-1357-21)
On March 7, 2023, the New Jersey Appellate Division issued an unpublished opinion in Ward & O'Donnell, LLC v. Nancy Ward, A-2702-21, concerning an action for ejectment from an alleged possessory life estate.
The case arose out of a dispute between Ward & O'Donnell, LLC, the owner of certain real property in Westfield, New Jersey, and Nancy Ward ("Nancy"), the sister of James Ward ("James"), a principal of Ward & O'Donnell, LLC. Nancy had been granted certain rights in the property in 1999 by James and their other sister, Josephine. Under the terms of the document signed by the siblings, Nancy had the right to possess and use the property for "as long as she wishes" without paying rent.
In 2018, Ward & D'Donnell, LLC demanded that Nancy begin paying rent for the unit, alleging that the building's expenses had increased to such a great extent that such payments were necessary. Nancy did not do so, and the owner then brought an action for ejectment against Nancy. The trial court denied the ejectment and found in favor of Nancy, but required her to pay her proportionate share of the property taxes and other expenses from 2018 forward. The Appellate Division affirmed the trial court's decision, finding that even without a deed, will, lease or other written contract, a life estate could (and was) created by the document signed by the parties was, in fact, sufficient to create a life estate. (Ward & O'Donnell, LLC v. Nancy Ward, A-2702-21)
From an unpublished Appellate Division opinion, we have another example of a pro se litigant's inexperience with the legal process costing him possession of his premises and possibly $30,000. (*Pro se means those who forgo attorney representation and chose to represent themselves in court.)
This landlord, appearing pro se, brought an eviction action against a commercial tenant. At trial the landlord appears to have not properly entered the written lease into evidence and appears to have failed in fleshing out the terms of the lease. As such, the tenant admitted evidence of what appeared to be certain repair receipts undertaken and which the tenant claimed were expenditures which must reduce the rental payment obligations. (Known as a Marini hearing in NJ). The landlord lost his case at trial and the tenant remained in the property.
On appeal, the landlord asserted - for the first time - the fact that the terms of the lease required the tenant to make those repairs and therefore those receipts for repairs should not have reduced the rental payment obligation. The Appellate Division declined to review new or novel arguments on appeal which were not raised at trial. This means the landlord lost again.
The good news is that the landlord still has the option to file a legal action in the law division seeking those monies be paid to him based upon the terms on the lease (which is a contract), and contract suits must be filed within six years of the date whereon the breach occurred. It will be an uphill battle for this landlord but the lesson here is spending a little bit for attorneys fees (which should be recoupable per terms in any lease!) could have led to a positive result including eviction of a non-paying tenant, installation of a good paying tenant, and recovery of almost $30,000.
Jongho Jung v. Freds Bagels LLC, BER-LT-542-21; A-1494-21 (1/17/23)
Good news for new / upstart businesses embroiled in litigation seeking lost profits as part of their damages. New Jersey has joined the ranks of the majority of states recognizing that there should not exist a "per se ban on claims by new businesses for lost profits damages . . .."
It has been the standard in New Jersey to bar claims for lost profits where same were remote, uncertain, or speculative. However, the Supreme Court has recently held that whenever a new or upstart business pursues a claim for damages of lost profits, such claims require a "fact-sensitive analysis of the evidence [to] decide whether plaintiffs can prove lost profits damages with reasonable certainty." In applying its new rule the Court explained: "if the trial court determines that plaintiffs' lost profits evidence is sufficient to establish their claim for damages with reasonable certainty despite plaintiffs' inexperience in developing [its new business], it should deny defendants' motions to bar the evidence and for summary judgment. If the court does not view plaintiffs' proofs to meet that test, it should grant defendants' motions and dismiss the complaints."
(Larry Schwartz v. Nicolas Menas, Esq. A-54/55-20)
In a split bench (4-3), the NJ Supreme Court has established that an aggrieved property owner need to show a diminution of property value prior to being entitled to restoration damages when a neighbor illicitly cuts down generic foliage (trees, shrubs or bamboo) on another's property. This game changer of a case flies in the face of property rights.
At issue in this case was a lot of bamboo. As one may know, bamboo is not easily contained once planted. It easily spreads and does not adhere to drawn property lines. In this case, Neighbor planted bamboo years ago which ultimately spread across his property and onto that of Next-door Neighbor's. Neighbor did not claim this bamboo held a "peculiar value" to him but rather referred to this bamboo as a "fence" used for privacy. One day Next-door Neighbor's landscapers came and removed all the bamboo from both properties. Neighbor sued seeking damages to replace the torn down bamboo.
The Supreme Court held that although a trespass occurred and foliage was undisputedly removed, without showing the property's value had been diminished, Neighbor was out of luck in seeking restoration damages. The Majority suggests that Neighbor should have shown either the bamboo was near and dear to him or that the value of his property was reduced by the removal. This holding seems very wrong when viewed through the lens of property rights and the dissent took this position. The evidence here established Next-door Neighbor's landscapers removed all of the bamboo from Neighbor's property without permission. Damages should be the cost to replace what was removed regardless of a personal attachment and regardless if the property value was diminished. (Kornbleuth v. Westover)
In a recent unpublished decision from the Appellate Division, the court found that a real estate broker had waived the right to receive quarterly commission payments in advance since the realtor failed to enforce that contractual provision for 11 years. The commission agreement at issue was for the lease of a commercial property and stated that the realtor would be paid a 6% commission on the rent, "in four equal installments per year, in advance..." While such payments were originally made in advance on a quarterly basis, at some point the owner switched to making monthly payments instead. In ruling for the owner the trial court found that the realtor accepted, "monthly payments continuously for eleven years, thereby constituting a waiver of the quarterly payment schedule set forth in the agreement." Such finding was upheld by the Appellate Division. This case underscores the importance that parties to a contract not sit on their rights and enforce contractual provisions in a timely manner when they are not being followed. (Barry H. Gertsman & Company v. 5218 Atlantic Avenue Associates LLC, et. al.)
A recent unpublished decision from the Appellate Division found there to be no enforceable contract between a buyer and seller of real estate where, despite a term sheet and letter of intent, no formal contract was signed. The case involved the sale of commercial property in Millstone, New Jersey. The parties exchanged a term sheet and letter of intent for the buyer to purchase the property, and the attorneys proceeded to draft and modify a formal contract for the sale. Despite the buyer signing the negotiated contract, the seller never executed it and decided not to move forward with the transaction. Consequently, the buyer filed suit and sought a court order directing that the sale go through.
The Buyer argued that while the language of the LOI stated that terms of the LOI would be enforceable upon a mutually-agreed upon contract. it did not specify that the contract had to be signed. Therefore, based upon the signed LOI and the negotiated contract terms, there was an valid agreement to be enforced by the court. However, both the trial judge and Appellate Division disagreed, finding that the evidence as a whole demonstrated an intent that a final agreement was contingent upon the parties executing a formal written contract. Since this didn't happen, the Buyer's case was dismissed. (501 Jersey Ave LLC v. XXXIII Associates/Riverside Center, LLC)
In an interesting unpublished Law Division case, tenants argued that a landlord violated the City of Newark's rent control ordinance because it was trying to evict them for failure to pay "additional rents" (such as late fees and legal fees for collection of past-due rents) which would increase the total rent above the cap set forth in the ordinance. The Judge agreed with the tenant’s argument that the landlord could not insist on the additional rent as part of a summary dispossess (eviction) action, which is an important factor in this case as the only remedy sought in the case was to evict the tenants for failure to pay rents. The Court wrote that its holding only applies in a summary dispossess action and that the landlord could file suit pursuant to contract law in the law division seeking a monetary remedy. The unpublished nature of this decision means that it is not binding upon other courts, but it will be interesting to see if the Court's clarifying dicta holds up in an action to recover the additional rent because if the lease violates the law per the rent control ordinance, then it would follow that the portion of the contract that is in violation of the law would be unenforceable. (Opex Realty Management LLC v. Taylor
In an unpublished decision, the Appellate Division found that a commercial tenant could be evicted where although there were some minor issues with the building, such issues did not rise to the level of uninhabitability. First, the court confirmed that the case of Marini v. Ireland, 56 N.J. 130 (1970) is applicable both to residential and commercial tenancies. After doing so, the court referenced Berzito v. Gambino, 63 N.J. 460 (1973) which established the factors to consider when determining if a landlord breached the warranty of habitability. Specifically, those factors are as follows: 1. Has there been a violation of any applicable housing code or building or sanitary regulations? 2. Is the nature of the deficiency or defect such as to affect a vital facility? 3. What is its potential or actual effect upon safety and sanitation? 4. For what length of time has it persisted? 5. What is the age of the structure? 6. What is the amount of the rent? 7. Can the tenant be said to have waived the defect or be estopped to complain? and 8. Was the tenant in any way responsible for the defective condition? Based upon these factors, the appellate court determined that there was no breach of the warranty of habitability. Although the record did demonstrate that there were some roof leaks as well as some vegetable oil smells and leaks from the adjacent unit in the building, the evidence in the record demonstrated that such issues were mere inconveniences and did not rise to the level of uninhabitability. Consequently, the tenant was not entitled to an abatement and the matter was remanded so that a judgment of possession could be issued for the Landlord. (Linwood Avenue Development, LLC v. Advanced Professional Plumbing, Heating & Cooling, LLC)
In an unpublished opinion, the New Jersey Appellate Division upheld a trial court's order of specific performance in a commercial real estate transaction involving a car wash. During the due diligence period, the buyer of the car wash discovered some soil contamination and the parties entered into an amendment to the contract providing that the seller would remediate the known contamination as well as, "any additional contamination that may be discovered." When seller's contractor discovered that the ground water was contaminated in addition to the soil, seller sought to void the rider for lack of consideration. However, both the trial and appellate courts disagreed, finding that the buyer had a right to cancel the contract based upon the discovery of the initial contamination and that, "[a]n agreement to refrain from exercising a legal right is a form of consideration." Likewise, the court rejected seller's argument that it only had a duty to address the soil contamination under the terms of the amendment since no such limitation was explicitly stated therein. Consequently, the Appellate Division enforced the trial judge's order of specific performance. (Miguel A. Hector v. Super Car Wash Limited Liability Company, et. al.)
Peter J. Vazquez, Jr.