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Hermann Warehouse Corporation v. SB Building Associates, Limited Partnership

A-0908-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

LEASES; CONSTRUCTIVE EVICTION—If a tenant fails to timely leave its leased premises after the event giving rise to its claim that it was constructively evicted, the claim must fail.

A commercial landlord and its tenant signed leases for a building in an industrial complex. There was a fire in the industrial complex three months before the end of the lease terms. It indirectly cut off utility services to one of the leased buildings. After the fire, the tenant began removing its products from that building to a different building. That process took four to five weeks. The tenant continued to receive materials at its other buildings, but didn’t receive any at the affected building. It did use that building for storage and for shipping. Four or five weeks after the fire, the landlord restored electricity to the building. Nonetheless, the tenant told the landlord that it was terminating the lease, and then left without paying the rent for three previous months. It also left the parking lot in a state of disrepair.

The landlord refused to refund the security deposit and the tenant sued. The landlord counterclaimed for the unpaid rent and for damages to the parking lot. After a bench trial, the lower court found that the tenant had been constructively evicted and was entitled to the security deposit. It also found that the landlord was entitled to damages for repair of the parking lot. The landlord appealed, claiming error in the finding of constructive eviction and error in the order to return the security deposit.

The Appellate Division agreed with the landlord and held that the lower court was wrong when it concluded that the tenant had been constructively evicted. Constructive eviction can only occur when a landlord deprives its tenant of the beneficial enjoyment of the leased premises. The condition must be permanent in the sense that it will continue and probably worsen if not remedied, and it must have been caused by the landlord. Furthermore, the right to claim constructive eviction is lost if the tenant does not vacate its premises within a reasonable time. Therefore, even if an act constituting constructive eviction has occurred, the tenant’s rent liability continues if the premises are not vacated. The Appellate Division held that because the tenant had failed to timely leave, it could not argue that it had been constructively evicted. Despite the interruption of the electrical services, the tenant still used the building as a storage and shipping facility. Furthermore, electricity was restored within four to five weeks after the fire, well within the remainder of the tenancy. As a result, the Court held that the lower court erred in awarding abatement of the rent.


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