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The Galbreath Company Alexander Summer Division, L.L.C. v. Noise Unlimited, Inc.

A-2218-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

BROKERS; COMMISSIONS; LEASES — Where a landlord agrees to pay commissions to its broker not only for the original lease but for extensions as well, the landlord is liable to pay those commissions even if the original tenant’s assignee holds the lease at the time the lease term is extended.

A broker and property owner entered into a brokerage agreement. The broker introduced a prospective tenant to the owner and the owner agreed to pay a 5% commission upon lease commencement. The owner also agreed to pay a 5% commission in the event of any “exercise of renewal options, any extension, or execution of a new lease” by the tenant. The broker introduced the owner to a cable television operator who signed a lease with two five-year renewal options. The lease allowed the tenant to sublet or assign the lease to an affiliate, wholly-owned subsidiary, or successor by merger, reorganization or consolidation without the owner’s consent as long as the assignee assumed all of the tenant’s obligations under the lease. Ten months after the lease was signed, the tenant applied to the New Jersey Board of Public Utilities for approval of an internal restructuring that would result in the dissolution of the tenant and the assumption of some of its responsibilities by a new cable operator. After the restructuring was approved, the new cable operator advised the owner that it was assuming the tenant’s responsibilities under the lease. The new operator continued to occupy the leased premises throughout the duration of the lease term. The new operator and the owner entered into a lease amendment extending the lease for five years. The broker demanded its commission for the renewal, but the owner did not respond.

The broker sued the owner for its commission on the renewal. The owner denied the allegations, claiming that because the current tenant was not the same tenant identified in the commission agreement, it owed nothing. The broker moved for summary judgment, which was granted. The lower court found that, pursuant to the lease, the lease amendment was an extension of the lease for which a commission was owed. The owner appealed, but the Appellate Division affirmed. The Court noted that even though the new operator was not the named tenant, it was the tenant’s successor-in-interest and had a close relationship with the tenant. It found that the new operator’s continued occupancy would not have occurred if not for the broker’s services as set forth in the commission agreement. Further, the commission agreement encompassed lease extensions, renewals or new leases and required the owner to pay the broker a commission for the first five years of any lease extension or renewal or a new lease. Therefore, the broker was entitled to a commission from the owner for the additional five year term agreed-to in the lease amendment. The Court noted that the corporate restructuring did not alter the broker’s status as the procuring or efficient cause of the new operator entering into the lease amendment with the owner.

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