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Gregory v. Pulasky

A-1347-09T3 (N.J. Super. App. Div. 2010) (Unpublished)

LANDLORD-TENANT; LITIGATION — When a court of law examines the reasonableness of a landlord’s claimed mitigation expenses, it should not merely assume that a listing broker should have agreed to undertake all marketing expenses in return for a commission.

A lease for a single family home had a five year term at a monthly rent of $1,450. It made the tenant responsible for increases in real estate taxes and insurance as additional rent. After two and a half years, the tenant vacated the premises after giving its landlord only one day’s notice. Except for normal wear and tear, the property was left undamaged.

The lease required the landlord to mitigate damages in the event of a default. The landlord wrote the tenant advising that he intended to retain the security deposit as an offset against rent to become due. He took two steps to try to find a new tenant. He began placing advertisements in the local newspapers and he engaged the services of a real estate broker who listed the property on a multiple listing service. The broker’s commission was to equal one month’s rent. The landlord paid for the newspaper advertisements. They listed the broker’s telephone number. The broker was to show the property to all prospective tenants. The landlord found this arrangement fair in the adverse economic climate, and aggressively pursued these two avenues for a new tenant in order to mitigate damages. A new tenant was found and moved in eight months after the last rent payment from the vacating tenant. As an added incentive, the landlord permitted the new tenant to live in the unit rent free for his first month.

The landlord then sued the old tenant for damages. The tenant did not respond, and a default was entered. After a proof hearing, the court awarded damages to the landlord. It allowed the landlord seven months’ rent, rejecting the claim for the rent-free month, finding that arrangement not the responsibility of the tenant. It also allowed reimbursement for various carrying charges and the commission. The lower court disallowed the costs of the newspaper advertising and painting expenses. It found the tenant had left the home in an undamaged state and shouldn’t be responsible for repainting. The lower court also found the advertising expenses unreasonable, holding that the broker should have paid them out of her commission. It reasoned that the landlord unreasonably chose to incur advertising costs in addition to hiring a broker. The landlord appealed, arguing the lower court erred in disallowing these additional expenses.

The Appellate Division affirmed the lower court’s ruling, except as to the advertising expenses, finding it reasonable that the broker was unwilling to pay the advertising costs for such a modest commission (one month’s rent). Further, the Court found the advertisements were modest in size and the amount spent was reasonable. The Court felt that the landlord’s efforts to mitigate his damages in a bad economy were reasonable, inclusive of the separate advertising cost. Thus, that particular expense should also have been absorbed by the breaching tenant.

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