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Decibus v. Moros

A-4931-97T1 (N.J. Super. App. Div. 1999) (Unpublished)

LEASES; ASSIGNMENTS; LIABILITY—Absent a clear agreement to the contrary, where an assignor of a lease is liable for its assignee’s obligations, that responsibility ends when the final, exercised renewal term expires even if the lease is further extended.

This matter involved liability under a five-year commercial lease which was twice assigned and twice extended. The second assignees were relieved in bankruptcy of any obligations under the lease. Therefore, the landlord sued the first assignees for damages caused by the second assignees’ default. The lower court rejected the landlord’s claim and after sorting through a somewhat convoluted leasing history, it found (and the Appellate Division agreed) that the original lease expired on July 31, 1987 and provided for two additional five year renewal term. When the lease was renewed, however, the second renewal term was deleted. After renewal, the then tenant assigned the lease to the buyer of its business. The landlord refused to agree to the assignment, but during the course of legal proceedings that followed, a settlement was reached. Under that settlement, the assigning tenant agreed to remain primarily liable under the original lease. Sometime before the July 31, 1992 expiration date of the lease, the assignee entered into an extension of lease agreement with its landlord. Shortly thereafter, however, it defaulted in the payment of rent and taxes and was evicted. The landlord then made a claim against that tenant’s predecessor pursuant to the settlement agreement and in its role as the previous tenant who would remain liable for the lease. After hearing testimony, the lower court determined that the parties had not agreed that the assigning tenant would remain liable beyond July 31, 1992. In essence, the lower court focused on whether there was a “meeting of the minds” as far as the consent of the assignment of the lease was concerned. It found that the landlord did not meet its burden of proving by a preponderance of the evidence that the assigning tenant was personally liable on the lease beyond July 31, 1992. The landlord argued to the Appellate Division that the lower court had mistakenly categorized the extension of lease as a new lease. The Appellate Division, reviewing the record, could not find anything to support the landlord’s claim that the lower court concluded that the extension agreement was, in fact a new lease. According to the Court, the lease was for a total of ten years, and at the expiration of the ten years the lease terminated. When the second renewal option was deleted, it was no longer applicable. Consequently, the new tenant (its assignee) had no authority to extend the lease beyond July 31, 1992. The assignor had no rights beyond July 31, 1992 and therefor could assign no rights beyond then. For that reason, it could not be liable beyond July 31, 1992, unless there was an express agreement to the contrary. Even though the consent to assignment stated that the “assignee” had the option to extend the lease, this was not the same as having the renewal option incorporated within the lease. The consent to assignment and associated documents were rife with errors. Consequently, the Court refused to try to make a different or better contract for the parties than the one that they had made for themselves. The consent to assignment agreement did not state that the assigning tenant would remain liable under any extension of the lease, and the Court refused to read such an obligation into the consent document.


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