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The DME Group, Inc. v. Amor Realty Co., LP

A-2426-03T3 (N.J. Super. App. Div. 2004) (Unpublished)

LEASES; ARBITRATION—A lease may validly require that a tenant first pay a disputed amount before being entitled to have the dispute resolved by arbitration.

Under a commercial lease, the tenant was to pay its share of certain common area expenses. Its landlord then claimed that the tenant failed to pay its share. The tenant replied by sending the landlord a notice to arbitrate in accordance with the lease. The landlord refused, and the tenant sought an order to require arbitration. The arbitration clause in the tenant’s lease required any unresolved dispute to be determined by arbitration, but required the tenant to pay the disputed amount prior to arbitration. The amount paid would be adjusted accordingly after the arbitration. The tenant had not paid and that was the basis for the landlord’s refusal to arbitrate the matter. The landlord then sued to collect the disputed charges.

The lower court ordered that the matter proceed to arbitration regarding the common area expenses as well as to decide whether the tenant’s failure to pay the disputed charges was a condition precedent to demanding arbitration. However, the Court also ordered the tenant to pay the disputed amount prior to the arbitration.

The Appellate Division held that the lower court’s order confused the concept of what was and was not arbitrable. The lease clearly stated that such disputes were to be resolved by arbitration in accordance with the Alternative Procedure for Dispute Resolution Act. Therefore, the Appellate Division reversed the lower court’s decision, directing the parties arbitrate the disputed amount subject to the tenant’s paying the amount claimed to be owed to the landlord as a condition precedent to arbitration. If the tenant failed to satisfy the condition precedent, the Court ordered that judgment should be entered in favor of the landlord for the amount owed.

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