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Cohn v. Under the Sea, Inc.

A-1237-03T3 (N.J. Super. App. Div. 2004) (Unpublished)

LANDLORD-TENANT; EVICTION—A conflict of interest between a tenant and its landlord whose members were formerly part owners of the tenant is not a viable defense to a dispossess action but may be raised later in a suit for damages.

A law firm sued a mediation company and its principal for legal fees in connection with mediation services. The principal counterclaimed, seeking damages for various acts of legal malpractice. The principal also filed a third party complaint against tenants of the law firm “seeking payment for fees allegedly earned in the sale of two of the [tenants’] dental practices and for contribution if [the principal] were found liable” to the law firm. In the middle of that litigation, the law firm “sent a Notice to Quit” to its dental tenants, contending that their tenancy was only month-to-month and that one month’s notice had been given. The tenants refused to vacate and an eviction action was filed. The grounds of thee action were unpaid rent and the holdover tenancy. At trial, it was stipulated that this was a commercial tenancy without a lease and that a proper Notice to Quit was served. The tenants, however, contended that “there was a conflict of interest on the part of [their law firm-landlord’s partners] who at one time were shareholders of the mediation company.” The lower court dismissed this as a viable defense to a dispossess action and entered a judgment for possession. The Appellate Division agreed, pointing out that the collection action between the law firm and the mediation company “had nothing to do with the simple right to possession under a commercial lease.” If the tenants wanted “to litigate damages or [recover their] loss and investment as to the tenancy,” they had the right to do so, but that claim did not serve as a bar to the entry of the judgment of possession.

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