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Gig’s Inc. v. Park

A-0909-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

LEASES; STATUTE OF LIMITATIONS — Where a tenant assures its landlord that it will restore its demised premises upon vacating those premises, the six year statute of limitations for damage to property runs from when such assurance is made.

A landlord operated a restaurant in a building he had owned for twenty-five years. He then sold the restaurant to a buyer who then entered into a restaurant lease with the landlord. The lease was for a term of ten years and fifteen days, with an $8,000 monthly rent for the first five years and $9,000 for the last five years. The tenant assigned the lease to a closely held corporation, but she remained personally liable. A rider to the lease gave the tenant an option to renew for an additional five years. The rider provided that if the parties could not agree upon the rental amount for the extended period, the issue would be subject to binding arbitration. The lease also contained a non-waiver of rights provision, under which the landlord’s failure to immediately enforce any lease provision would not be deemed a waiver of the right to seek enforcement in the future.

A lease provision obligated the tenant to make repairs and maintain the premises in good condition. Soon after taking possession, the tenant made certain repairs and alterations without the landlord’s prior approval. The tenant’s husband was the manager of the restaurant and chief decision maker. The landlord asserted that he made a side agreement with the husband from the beginning of the lease term, in which he asked a daytime parker at his property to pay the tenant a monthly fee of $1,500 to offset the tenant’s monthly rent. The landlord asserted that this offset represented an interest-free loan. This arrangement lasted for the first seven and one half years of the lease. The husband, on behalf of the tenant, then signed a document directing the daytime parker to make all future payments to the landlord. By this time, the rent had risen to $9,000 per month under the lease. On the same date, the husband also executed an amendment to the lease under which the rent was increased to $10,500 for the remaining portion of the ten years in the original lease term. The husband signed the amendment above the tenant’s typewritten name. The tenant was informed of the amendment by her husband and she did not dispute its validity. The landlord asserted that the interest free loan of $1,500 per month for the seven and on half years was to be paid back by the rent increase to $10,500 over the same term. The tenant took the position that the monthly rent increase would permit the same terms during the five year option period, which they indicated they were exercising. The landlord responded that the monthly rent during the option period would increase to $18,500. The tenant continued to pay $10,500.

The landlord filed a complaint, seeking to compel arbitration. In response, the tenant vacated the premises. Then, the landlord discovered the building was extensively damaged, and amended the complaint to seek damages. The case went to trial, and a jury awarded the landlord $105,775 on account of the damages. The tenant appealed.

The Appellate Division affirmed the lower court’s verdict. The tenant had argued that the six year limitations period for damages to property had expired. The Court disagreed, finding the husband had assured the landlord that he would restore the property upon vacating it. When the landlord inspected the premises after the tenant vacated, only then did he discover the remaining damage. Further, the tenant had not raised a statute of limitations defense in her answer to the landlord’s lawsuit but only late in the trial. The Court agreed with the lower court that the limitations period did not start to run until the tenant vacated the property, and that the tenant had unreasonably delayed its offer of this defense until the fifth day of a six day jury trial, and so was equitably estopped from introducing it. The Court also held the plain language of the lease required the landlord to wait until the lease’s expiration before litigating whether the tenant had delivered the premises in good order and condition.


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