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Larken Associates v. Medicia Pharmaceutical Corp.

A-1233-99T1 (N.J. Super. App. Div. 2000) (Unpublished)

LEASES; CONDITION OF PREMISES—A tenant’s obligation to return its premises in good condition is measured by the condition of the premises at the beginning of the term of its final lease, not of its original lease.

Over a period of seventeen years, a landlord and tenant entered into three lease agreements for various units within a 35,000 square foot building. After a variety of space swappings and acquiring of additional spaces within the building, the tenant eventually leased five units within the building, comprising 30,000 square feet of space. Key to the dispute for the Court was that in 1989, prior to the expiration of the first heavily amended lease, the parties executed a second lease agreement, at which time the leased premises included three units comprising 20,000 square feet of space. When the term of the second lease ended, the parties entered into a third lease agreement, which increased the amount of leased space to 30,000 square feet. Ultimately, the tenant vacated the entire premises, whereupon the landlord alleged that it failed to keep the leased premises in good repair, failed to return the leased premises in good condition, and failed to remove alterations at the end of the tenancy. In essence, the landlord argued that the tenant was responsible for returning the leased premises in the same condition as when the tenant originally entered each of the spaces. More specifically, the landlord maintained that the condition of the premises at the time a tenant vacates should be compared to the condition as of the taking of possession and, thus, the Court should have considered the original occupancy date as the date that the tenant took possession. Case law imposes a duty on a tenant to redeliver the premises in good repair, but that obligation is a comparative one only. Essentially, a tenant’s obligation is dependent upon the nature, quality, and the condition at the time that it executed the lease. Consequently, “the measure of damages is the amount required to restore the premises to the condition they were in at the beginning of the lease.” The landlord pointed to case law that had held a tenant responsible from the date of its original occupancy, but the Court pointed out that the cited case was one in which a tenant became a month-to-month tenant on the same terms as set forth in the original lease and that the month-to-month tenancy was actually considered as part of the original tenancy. The Appellate Division was unsympathetic to the landlord’s position. Unlike the parties in the case cited by the landlord, here, the landlord and tenant negotiated three new lease agreements. Moreover, each lease agreement varied in the term of years, the rent, and the space occupied. “It would be inappropriate to consider the three leases as one agreement when they all contained different terms.” In addition, each of the three lease agreements contained a covenant pursuant to which the tenant was obligated to restore the premises to “as good condition as they were at the beginning of the term, ordinary wear excepted… [(emphasis added).].” According to the Court, the “beginning of the term” referred to the condition of the leasehold premises as of the beginning of each lease. Because the lease terms were clear and unambiguous, the lower court was not required to look to the intent of the parties. Therefore, the Court felt obligated to enforce the contract as written and not attempt to make a better contract or alter the contract terms. Renewal of the leases implied a new leasehold and a new lease was drafted. Had there been an extension of any pre-existing lease, it would have constituted a continuation of the prior terms and would not have required a new instrument. “Thus, the existence of the three leases and the words embodied within the agreements, clearly and unambiguously indicate the leases were separate.” Consequently, the tenant’s obligation to restore the premises was limited to the condition in which the premises existed at the beginning of the final lease. To the extent that the statute of limitations had already expired with respect to the second and first lease, no cause of action could be maintained by the landlord for the breach of those leases.


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