December 12, 2014
Lease agreements, like many contracts, involve many “moving pieces” across numerous paragraphs. Even the most seemingly benign phrases may hold the key to success. The New Jersey Superior Court, Appellate Division issued one such ruling, where a commercial tenant emerged victorious because the lease’s use of the language “including but not limited to” defeated the landlord’s interpretation of determining the fair market value of the space.
The dispute leading to the lawsuit involved Cablevision of Oakland, LLC, a commercial tenant, and its landlord, CK Bergen Holdings, LLC, from which Cablevision leased a 58,000-square-foot space. The parties agreed to a 20-year lease, followed by four more five-year options to extend. For each option period, the rent was to be set at “fair market value.”
Unfortunately, the landlord and tenant could not even come close to agreeing on the fair market value of the space when the initial lease expired in 2012. The tenant’s appraisal opined that the space was worth $12 per square foot. The landlord’s appraiser set the fair market value at $25 per square foot. Ultimately, the parties ended up in court, with the trial judge appointing a neutral third appraiser. This appraiser set the fair market value at $11 per square foot.
The landlord protested, arguing that the third appraiser failed to consider properties in all nine towns listed for comparison in the parties’ lease agreement. The trial court was not persuaded, noting that, in the past, the landlord had relied on an appraisal that considered properties in only one of the nine towns listed in the lease.
After receiving the unfavorable ruling, the landlord appeal. CK Bergen again asserted that the use of the word “shall” in the lease paragraph discussing comparison properties meant that any valid appraisal was required to compare the landlord’s space to similar properties in each of the nine listed towns. The appeals court, however, concluded that the language of the lease agreement made it plain that the appraiser was only bound to consider properties anywhere within a 20-mile radius of the space Cablevision was leasing and that the list of nine towns was just a group of example locales that fell within that 20-mile radius.
The key to the appeals court’s interpretation of this lease was contained elsewhere in the comparisons paragraph. The document stated that “fair market rental … shall be determined by comparing comparable parcels … within a 20 mile radius of the Premises, including but not limited to the towns of Wayne, Fairlawn [sic], Paramus, Mahwah, Verona, Montclair, Little Falls, West Paterson and Parsippany.” New Jersey law regarding the interpretation of contract language is clear that the use of the phrase “including but not limited to” means an “unrestricted list of examples.”
Since the list of nine towns comprised just a group of examples, the appraisal was in compliance with the lease’s terms, and the trial court’s ruling in favor of the tenant was proper. The lesson here is that, while commercial lease agreements may sometimes seem straightforward, they often involve many intricate elements, any one of which could be the key to determining whether or not a proposed arrangement makes business sense for you. For your commercial lease negotiation (or lease dispute) needs, talk to the real estate attorneys at Samuel C. Berger, P.C. Our New Jersey real estate attorneys can be there at every step to help your business set up a lease that works for you. Reach us online or call (201) 587-1500 or (212) 380-8117.
More Articles:
Landlord Wins on Security Deposit, Loses Rent and Damages Claims in Appellate Division, New York & New Jersey Real Estate Lawyer Blog, Oct. 10, 2014
Indemnity Clause in Lease Puts Commercial Tenant on Hook for Accident on Stairs Outside Tenant’s Premises, New York & New Jersey Real Estate Lawyer Blog, Sept. 12, 2014
Lease Contract’s Terms Let Building Owners Escape Liability for Injury Suffered by Tenant’s Employee, New York & New Jersey Real Estate Lawyer Blog, Aug. 29, 2014