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Lonza, Inc. v. Sokol, Behot & Fiorenzo, P.C.

A-1227-03T2 (N.J. Super. App. Div. 2005) (Unpublished)

LEASES; CONTINGENCIES; CONSENT—Unless a lease’s contingency provision expressly calls for delivery of a written consent document, the contingency can be satisfied by the mere granting of the consent even if the document has not been delivered.

A tenant had excess leased office space and found a subtenant. The negotiated sublease included a provision entitled “SUBJECT TO OWNER CONSENT.” That provision read as follows: “This Sublease is executed conditionally upon receipt of the written consent of Owner within thirty (30) days after the date of delivery by Sublandlord to Subtenant of a fully executed counterpart of this Sublease. If such consent is not received within the time period, this Sublease may be terminated by either party hereto by written notice to the other. Sublandlord agrees to notify Subtenant promptly after Sublandlord’s receipt of such consent and to provide Subtenant with a copy of same. Subtenant agrees to execute such consent, if required, provided such consent does not materially alter Subtenant’s rights under this Sublease.” Delivery of the premises was intended to be on January 1. The Sublease was executed on December 6. Within the few days preceding January 1, after a flurry of activity, the landlord’s form of sublease was agreed-upon. On January 3, a real estate broker obtained the signatures of both the tenant and its subtenant and sent it to the master landlord for final signature. In the interim, on January 4, the subtenant visited and inspected the subleased premises and “expressed [its] displeasure with the condition of the premises, stating they were not ready for occupancy by January 1 ... and concluded that ‘[o]ur free rent period will not commence until the premises have been fully delivered to us in broom clean condition.” By return letter on the next day, the tenant’s attorney “confirmed that the subleased premises had not been available for delivery on January 1 ..., apologized for an inconvenience,” and promised that the premises would be available for delivery early the following week. On that same day, January 5, the landlord executed the consent to sublease and on January 10, sent three executed copies to the tenant’s attorney. On January 11, the subtenant hand-delivered a letter to the tenant exercising its right to terminate the Conditional Sublease based upon its failure to have received an executed copy of the Sublease and to have received a copy of the Landlord’s Consent within the thirty day period following December 7, when the Conditional Sublease had been fully executed. The next day, the tenant’s attorney, in writing, rejected the subtenant’s attempt to exercise its termination right. In that letter, the tenant’s attorney said, “[y]ou were well aware that the four (4) original counterparts of the Sublease, duly executed by you on behalf of [the subtenant], were executed on behalf of [the tenant] on December 7 ..., and sent via Federal Express to [the landlord] for its consent.” It went on to recite the history of the executed consent including that after it was signed by both the tenant and the subtenant, it was sent to the landlord on January 3 and that the landlord gave its oral consent on January 5 and delivered the executed documents to the tenant’s office on January 11. With that letter, the tenant’s attorney enclosed two executed copies of the sublease and two copies of the Consent to Sublet. The tenant refused to accept the subleased premises.

The tenant sued and the lower court, based on what it accepted as unrebutted evidence, came to the conclusion that the subtenant, in fact, had the right to terminate the sublease because the sublease and the landlord’s consent had not been delivered within thirty days. The tenant appealed the involuntary dismissal of its case and the Appellate Division agreed with the tenant that the matter should not have been dismissed. In doing so, the Court said: “[h]ere, viewing the evidence most favorably to [tenant], its [landlord] approved the Consent to Sublease on January 5… . The date of ‘receipt of the written consent of Owner’ contained in paragraph 38 of the Sublease can be reasonably construed to mean simply the date that the consent was given by the owner, not the date that either party physically received that consent document. Although ‘[c]ourts generally should not tinker with a finely drawn and precise contract entered into by experience business people that regulate their financial affairs[,]’ ... here, the language of paragraph 38 is hardly finely drawn or precise concerning the meaning of the ‘receipt of consent.’ There may, of course, be an issue as to whether the Consent to Sublet was, in fact, executed on that date. Moreover, the course of conduct in which the parties voluntarily engaged does not support a construction of paragraph 38 to strictly require that a copy of the Consent to Sublease must have been physically delivered to either party within the prescribed thirty-day period.” Further, the Appellate Division also found it notable “that a large portion of the delay in execution of the Consent to Sublease was attributable to the failure of [the subtenant] to timely reply to [the tenant’s] request for comments to the form of consent proposed by [the landlord].” Further, the Court took note of the subtenant’s active participation “in the process of negotiating” the provision of the landlord’s form of consent, “and its knowledge that an agreement on its terms had been reached, raise[d] the issue of whether [the subtenant] violated the duty of good faith and fair dealing in attempting to exercise its claimed rights under paragraph 38.” The Court also believed that further testimony might have shown that the subtenant had waived its right to insist upon strict enforcement of the thirty-day provision. For all of those reasons, the Appellate Division reversed the lower court’s “involuntary dismissal at the conclusion of [the tenant’s] case” and remanded the matter for continuation of the non-jury trial.

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