New Jersey Landlord Unable to Collect Rent After Retaking Physical, Legal Possession of Leased Property

June 12, 2015

stack_of_cash (1) A landlord lost in its bid to recover rent for the final year of a lease because the tenant had already surrendered the property. A recent ruling by the New Jersey Superior Court, Appellate Division points out that the landlord could not recover rent from the surrendering tenant after the landlord had already re-assumed physical and legal control over the leased space and had the ability to re-rent it to a new tenant.

The landlord, Coleman Brothers Realty, LLC, leased a warehouse and office building near Trenton to Acino Products, LLC for a five-year term starting in 2004. The tenant fell behind in its rent, which led the landlord to take the tenant to landlord-tenant court. The matter was concluded via a February 2007 consent order arranged between the lawyers for the landlord and the tenant. The two sides agreed that the tenant’s rent arrearage was $18,729 and that, each month, the tenant would pay at least $1,000 toward that arrearage in addition to the regular monthly rent sum owed.

The tenant only paid 11 of the 18 arrearage payments, leading the landlord to return to court under a new dispossess action. The tenant moved out a month later. The landlord launched a new action, this time outside the landlord-tenant court. The landlord accused the tenant of breaching the lease and claimed that it was entitled to “front rent,” or the amount of rent it would have received from the time Acino moved out until the end of the original lease term (from April 2008 to March 2009).

The trial court rejected the landlord’s claim for front rent because, it concluded, the 2007 consent order converted Acino’s tenancy to a month-to-month arrangement. The landlord appealed, and the appeals court upheld the ruling, but not for the same reasons as those stated by the trial court.

The 2007 consent order did not convert Acino’s tenancy to a month-to-month arrangement, the appeals court ruled. As long as Acino paid its rent and the $1,000 arrearage payment each month, it was entitled to stay on the premises until the lease ran out in 2009. However, even though no month-to-month tenancy existed, the landlord was still not entitled to collect the front rent. Regardless of whether the tenant voluntarily surrendered possession of the property (as Acino did in this case in April 2008), or the landlord had pursued its second dispossess action all the way to a judgment of possession, the landlord had re-assumed physical and legal control of the space that Acino had leased. Once Coleman had both legal and physical control of the property, it was able to rent that space to a new tenant, so it could not recover the “front rent” for the entire upcoming year.

Whether you are a commercial tenant struggling to make your rent payments, or a landlord dealing with a tenant who is behind, it is vitally important to know your options under the law. For reliable advice and representation, talk to the real estate attorneys at Samuel C. Berger, P.C. Our New Jersey real estate attorneys can help you contemplate your available choices for dealing with your commercial lease situation and set a plan going forward to best protect your business. Reach us online or call (201) 587-1500 or (212) 380-8117 to schedule a free, confidential initial consultation today.

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What to Expect When You Appear in Landlord/Tenant Court, New York & New Jersey Real Estate Lawyer Blog, Jan. 16, 2015