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KRGK Realty, L.L.C. v. Bartok

A-5155-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

LEASES; SUBLETTING — Subletting premises in violation of an explicit lease provision that requires a landlord’s prior consent violates the lease, even if the subletting is to a related entity.

A landlord and a tenant entered into a five-year commercial office lease. The lease prohibited the tenant from subleasing its premises or assigning the lease without the landlord’s written consent. The lease also prohibited the tenant from making alterations to the leased premises without the landlord’s consent. The landlord sent its tenant a notice to quit after it discovered that its tenant, without seeking the landlord’s permission, sublet a portion of the leased premises and installed a new sign on the building. The landlord then filed an eviction complaint against the tenant on the basis of its tenant’s violation of the terms of the lease.

At trial, the tenant claimed that the landlord knew that it was sharing the space with a related entity since the beginning of the tenancy. The tenant also claimed that it informed the landlord that it was going to put up signs, and the landlord did not object. The landlord contended that, at the time the lease was executed, he advised the tenant that it could not sublease the space. The lease contained a provision prohibiting assignment or subletting without the landlord’s permission and also required the tenant to submit financial statements for any prospective assignee or subtenant. The landlord also contended that it gave the tenant permission to slide one of its signs into the existing sign casing, but that it did not authorize the tenant to install a new sign by driving masonry nails into the building’s exterior.

The lower court concluded that its tenant was bound by the terms of the lease, and that the lease prohibited the tenant from assigning the lease or subletting a portion of the leased premises without the landlord’s permission. It found that the tenant subleased the premises to a related entity without the landlord’s permission. The lower court also found that the tenant’s installation of a new sign, by driving masonry nails into the building’s exterior, violated a lease provision that prohibited the tenant from making alterations to the premises without the landlord’s permission.

The tenant appealed, but the Appellate Division affirmed the lower court’s ruling, noting that the lease’s prohibition on subletting was clearly intended to protect the landlord from financially irresponsible tenants. The Court pointed to the lease’s provision that required the tenant to submit financial statements and business references from prospective subtenants. It found that the tenant committed a fundamental violation of the lease that justified the eviction of the tenant, noting that the eviction statute gives landlords a right of re-entry for a violation of lease covenants. In addition, the lease specifically granted the landlord the right to terminate the lease and recapture the leased premises if the tenant subleased the premises without the landlord’s permission. The Court did not determine whether the damage to the building, absent the unauthorized sublease, would have been sufficient grounds to evict the tenant. However, the Court noted that the damage coupled with the more serious lease violation of making an unauthorized sublease, bolstered the lower court’s decision to evict the tenant.


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