Barclays Bank P.C., New York Branch v. 865 Centennial Avenue Associates Limited Partnership

26 F. Supp.2d 712 (D. N.J. 1998)
  • Opinion Date: June 23, 1998

LEASES—Even though a notice is labeled “notice of intention to terminate,” if the context of the notice clearly indicates that the tenant is exercising its termination right, it will not be treated as conditional.

Pursuant to a written lease, a tenant leased an industrial building and half of a ten acre parcel for a ten year term. Subsequently, the landlord mortgaged the property and the landlord assigned all interest in the lease to the mortgagee. When the landlord defaulted, the mortgagee directed that the tenant send all future payments to it. Shortly thereafter, the mortgagee commenced a foreclosure action against the landlord. Before the foreclosure judgment was issued, the New Jersey Commissioner of Transportation filed a Declaration of Taking. The lease provided, in part, that: “[i]f twenty percent (20%) or more of the Land or Building [is] involved in the taking, then, as a result of such event, Tenant may elect, at its option, to terminate the Lease by giving notice to Landlord within sixty (60) days after the vesting of title as a result of the taking.”

The tenant sent a letter to both the landlord and its mortgagee, reading, in part, as follows: “This letter is intended to provide the Landlord with notice of [the tenant’s] intent to terminate the Lease pursuant to its rights under Section 12(b) of the Lease. At this point in time, [the tenant] is actively pursuing other potential sites and it is [the tenant’s] current projection that it will be vacating the Premises sometime during the first quarter of 1996. However, we will of course keep you advised of our plans as they develop and anticipate being able to provide the landlord with no less than thirty (30) days notice of the actual date that [the tenant] will vacate the Premises.” The mortgagee argued that the tenant’s letter did not constitute a proper election to terminate the lease because it was framed in conditional language. It also contended that even if the termination was valid, the tenant should be found to be a holdover tenant and pay rent and monies due under the lease.

The Court found in the tenant’s favor on both issues. It found that the tenant had an option to terminate the lease and that if twenty percent or more of the leased premises were taken to exercise the option, the tenant needed to give its landlord 60 days’ notice. Here the State had already declared a taking. Within 60 days after the Commissioner of Transportation issued the Declaration of Taking, the tenant wrote to its landlord to “provide [it] with notice of the tenant’s intent to break the lease.” The Court read the notice as advising the landlord and mortgagee that it was actively looking for other sites and that it would vacate the leased premises about six months later. The Court rejected the landlord’s argument that because the “notice to terminate” was labeled as a notice of intent to terminate, it did not constitute the appropriate prior notice. The Court also rejected the landlord’s argument that its tenant waived its termination option by staying and paying rent for a prolonged period of time. In so holding, the Court pointed out that the lease was silent as to how long the tenant had to vacate the premises and the District Court Judge was unwilling to hold that there had been a waiver.