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Krokovic v. Thomas

A-1841-02T3 (N.J. Super. App. Div. 2004) (Unpublished)

LANDLORD-TENANT; SUBLEASES—A landlord who does not directly benefit from rent paid by a subtenant is not unjustly enriched if the subtenancy turns out to be illegal and the sublandlord doesn’t refund the subtenant’s rent.

A landlord leased a single family property. The lease provided that the tenant could not sublet the property without the landlord’s consent and that it could not be occupied by more than five people. The tenant illegally sublet the property to thirteen subtenants. The subtenants were evicted and they sued for the return of the rent they paid under the sublease. The lower court entered a judgment against the primary landlord under the theory of unjust enrichment. The court reasoned that the landlord was the ultimate beneficiary of the illegal sub-tenancies and was therefore responsible for returning the rent paid under those illegal subleases. The Appellate Division reversed, noting that, in order to receive the return of the rent from the landlord under the theory of unjust enrichment, the subtenants needed to prove that the landlord received a benefit and that the retention of that benefit without payment was unjust. In this case, it was unclear if the landlord received any benefit from the subtenants. The subtenants paid their rent to the tenant and the tenant paid it to the landlord. The landlord was entitled to payment of its rent from the tenant, not from the subtenants. If the tenant used the subtenant’s rent to pay its own rent, and didn’t do so, then the tenant may have been unjustly enriched, not the landlord. The Court also noted that unjust enrichment is an equitable remedy which may not be available to individuals with unclean hands. If the subtenants entered into the sublease knowing that doing so was a violation of the lease and against the law, then they might not be entitled to recovery of any damages for unjust enrichment.

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