Tenant Seeks to Void Lease Based Upon Landlord’s Reneging on Promises About Neighboring Tenants

May 20, 2014

According to a recent complaint filed by Integrated Financial Service, Inc., against its landlord, Alexander 731 LLC, the tenant was the victim of a series of broken promises that destroyed the usefulness of the space it rented. The tenant claimed that the landlord promised a space surrounded by other non-medical commercial businesses, but that, shortly after the tenant signed its 10-year lease, the landlord surrounded it with a string of medical offices. The constant traffic of patients in medical distress and families in emotional distress was disastrous for the financial services company and, according to its court filing, entitled the tenant to a legal judgment voiding its lease, Law360.com reported.

Integrated Financial Service, Inc., an investment advisory and financial services company, entered into negotiations with Alexander 731 LLC regarding its space in West Windsor Township. The financial company sought and allegedly received assurances that the space it would rent was in a property devoid of medical offices and retail establishments because the tenant believed that such businesses would be harmful to its success.

The landlord allegedly assured the financial company that it intended to lease only to commercial businesses. After the first five-year lease ended in 2007, the tenant negotiated to rent a larger space for 10 years. Within less than one year, though, the landlord leased spaces to four medical offices, including a cardiology group directly across from Integrated’s office.

The tenant sued, seeking a declaratory judgment from the Superior Court in Mercer County. The tenant complained that, with its new neighbors, “there is a constant presence of sick people … sometimes on gurneys, with visible IV fluids.” Additionally, patients in emergency situations, surrounded by their emotionally distraught families, became a nearly daily occurrence, according to the tenant.

This atmosphere was devastating to the financial company’s business, as the complaint alleged that the new situation “has now made the new space completely unsuitable for plaintiff tenant’s purposes.”

Generally, tenants and landlords should attempt first to resolve their differences between themselves. In its complaint, the tenant asserted that it tried to do exactly that but received no replies except a cursory response from the landlord representative who made the original promises. According to the tenant, that reply stated simply that “the market has changed and the times have changed.”

The tenant vacated the space and filed its suit. The complaint lists multiple counts, including fraudulent inducement, breach of contract, breach of the implied covenant of good faith and fair dealing, constructive eviction, and negligent misrepresentation.

In New Jersey, a constructive eviction requires an act or failure to act, on the part of the landlord, that makes the leased space “unsuitable for the purpose for which they are leased, or which seriously interferes with the beneficial enjoyment of the premises.” Additionally, recent cases such as Puccini Foods, LLC v. Abbott Industries, Inc. have held that constructive eviction requires “physical interference.” These include problems such as failing to provide heat, repair defective plumbing, or correct a roof leak problem.

Another potential problem the tenant faces is that the assurances it received from the landlord were not reduced to writing. This magnifies the absolute importance of ensuring that all the terms of your agreement go into your lease agreement. For excellent advice and representation regarding the negotiation of your commercial lease, contact the New Jersey real estate attorneys at Samuel C. Berger, P.C. Reach us online or call (201) 587-1500 or (212) 380-8117.

Contact us through our website or call to schedule your free, confidential initial consultation today.

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