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Lake Gerard Fish & Game The Club v. Lake Gerard Co.

A-2554-97T5 (N.J. Super. App. Div. 1999) (Unpublished)

LEASES—Even though ground tenants improved buildings that they owned on leased land, their ground landlord need not grant them long term leases as long as it acts reasonably in renewing their existing leases.

In an unusual arrangement, a group of individuals and families owned separate dwellings constructed on leased lands. The land consisted of 1,806 acres surrounding a 95-acre lake. Over the prior 60 years, the owner entered into leases for lakefront lots. Initially the lots were campsites with platforms for tents. Eventually, modest but more substantial dwellings were built by the tenants. From the outset, the leases contained provisions that set fixed terms, limited use to certain times of the year, and required removal of improvements on expiration of the lease. All structures were owned by the tenants. The tract had never been formerly subdivided. The leases were not identifiable to specific parts of the overall tract. Over time, the property owner offered renewal leases for increasingly shorter terms, eventually for only one year terms. When renewal leases were tendered to tenants in the middle of 1991, the tenants, working together without regard to whether they had signed a renewal lease sought the following relief from the courts: (1) a permanent injunction against the landlord preventing it, in perpetuity, from removing or interfering with the tenants’ use of the rented land; (2) a declaration that the individual tenants were equitable owners of their respective rented premises; (3) appointment of a special master to establish defined lots at fair market values; and (4) an order compelling the landlord to convey the leased real estate to each individual tenant or, alternatively, to convert all leases to a 99-year term at equitable rentals. Essentially, the latter relief sought was reformation of the various leases.

Generally, lease provisions limiting the time of occupancy to the summer were disregarded as were requirements for written approval to modify residences or repair docks. The evidence presented suggested a collegial atmosphere designed to encourage prospective tenants to purchase residences on assurances they would receive lease renewals so long as they were good tenants. The landlord never refused to renew leases for any of the tenants who gave depositions. No tenant ever entered into a contract to purchase land at the property. All tenants made voluntary improvements to their residences. All repeatedly signed leases for additional terms, and in recent years, those terms were limited to one year. Generally, the tenants never negotiated lease terms with the property owner’s representative. The tenants generally acknowledged that they knew the lease terms governed their entitlement to occupy their residences, agreed to the lease terms, understood them, and conceded the statements made by the property manager were contrary to the terms of the lease. In addition, the tenants all knew that the lease conditions were controlled by the landowner, not the property manager, and knew that any request for a change to the lease terms had to be communicated to, and approved by, the landlord.

The tenants contended that they had established a prima facie case of promissory estoppel. The Court rejected that claim because one of the necessary elements of such estoppel is to show detriment of a definite and substantial nature incurred by reason of reliance on the promise. The Court held that the tenants bought and improved their residences with hopes of a long-term, perhaps lifetime, tenancy. The Court pointed out that the tenants had never been deprived of that hope. The leases had been renewed and it was only the refusal of some tenants to sign leases and pay the rent that initiated the eviction proceedings being reviewed in this case. There was no evidence the landlord would not continue to allow the tenants to utilize their residences as they had in the past under continued lease renewals. In addition, there was no evidence that the landlord had ever enforced the seasonal limitations provision in the various leases. The tenants also alleged a case for equitable estoppel, fraud, and entitlement to a constructive trust. The Court rejected all those claims. Essential to proving equitable estoppel is a finding that there is “a misrepresentation of material fact for one party and an unawareness of a true fact by the parties seeking [the] estoppel,” similar to the essential elements of fraud. To the Court, viewing the facts in a light most favorable to the tenants, it concluded that the tenants knew they were given leases for a limited duration. They also knew the durations were decreasing over time. They further knew, consistent with the representations by the property manager, that there were no problems with renewals as long as they remained “good tenants.” Under those circumstances, the material representation element of equitable estoppel or equitable fraud was found to be missing. In addition, establishment of a constructive trust requires proof of unjust enrichment, an element that could not be shown. The tenants paid the rent and used the lake property and its environs. Those rents, to the extent necessary, allowed the landlord to maintain the community. The suggestion of unjust enrichment from the landlord’s possession of the residences after lease termination was held to be speculative. The tenants then attempted to rely on the Mobile Home Park Act and the Anti-Eviction Act. The Court found the tenants’ reliance on the Mobile Home Act to be premature because its terms become effective only after a park owner gives notice to sell the park. No such notice was given in this case, even assuming that this particular development would have fallen under the Act. Also, putting aside the question of whether the Anti-Eviction Act applies to the tenant-owned residences and leased land, the Court found that the issues at hand dealt with the tenants’ unwillingness to abide by reasonable changes to lease terms and conditions. Lastly, to the extent that any individual tenant could argue applicability of the Anti-Eviction Act, the Court was not willing to treat such a defense when put forth by the tenants as a class because each such case should be decided on individual circumstances.


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