Mandia v. Applegate

310 N.J. Super. 435, 708 A.2d 1211 (App. Div. 1998)
  • Opinion Date: March 27, 1998

LANDLORD-TENANT; EASEMENTS; LICENSES; EVICTION—When a landlord allows its tenant to use adjacent space for display and sale of merchandise, only a revocable license is created; no easement has been granted. Such a landlord is entitled to be compensated for its tenant’s use of the outside area after the license has been revoked. A lease is to be read to narrowly construe its forfeiture provisions.

Under the terms of a lease for an ocean front store, it was clear that the landlord owned the area of the boardwalk below the overhang of the building, and the tenant was prohibited from encumbering or obstructing the boardwalk. However, one year, the landlord agreed to let the tenant display some clothing items under the overhang of the second story of the building for an end-of-season clearance sale. For the next 16 years, the tenant displayed its merchandise under the overhang without ever again asking the landlord’s permission. In 1994, the tenant was planning to install an awning that would extend over the boardwalk even farther than the overhang, and agreed to pay the landlord $5,000 compensation for use of the boardwalk area below the awning. Although the landlord drafted a contract, the tenant never signed it, installed the awning anyway, and continued to use it and the area under the overhang to display merchandise. In June, 1995, the landlord’s attorney sent the tenant a formal demand that it cease using the boardwalk for the display of merchandise, and reminded it that obstructing the boardwalk was a violation of the express terms of the lease. The tenant ignored this letter. In July 1995, the landlord sent another letter formally notifying the tenant that it was invoking the forfeiture clause of the lease. The tenant ignored this letter also, and continued to use the property as before. The landlord then sought to enjoin the tenant’s use of the boardwalk area, and requested compensation for past unauthorized use and a declaration of forfeiture of the leasehold. The lower court held that the landlord waived its right to prevent the tenant from displaying his merchandise under the overhang, and that the tenant could continue to do so without having to pay compensation. Because there was no similar pattern of use of the area below the awning, the court enjoined the tenant from using that area, and awarded the landlord a total of $5,000 as compensation for tenant’s unauthorized use under the awning in 1994, 1995, and 1996. Finally, the lower court dismissed the claim that the tenant forfeited its leasehold interest.

On appeal, the Appellate Division analyzed the lower court’s decision as holding that the tenant had acquired a perpetual easement for the display of property below the overhang. It then considered the law relating to easements created by implication and by prescription. An implied easement exists where an owner of land conveys to another an inner portion entirely surrounded by land owned by the conveyor, and exists to make the inner portion accessible. Even though the tenant clearly had an implied easement to use the boardwalk for access to his store, the Court held that this did not include use of the boardwalk for the display of merchandise, since such was not an “indispensable prerequisite” to the use of the store. An easement by prescription exists when there has been an adverse, exclusive, continuous, and notorious use for at least 20 years, a period not met by the tenant. Additionally, both tenant and landlord agreed that use of the overhang was with the landlord’s permission which, by definition, meant it was not adverse. The Court never considered whether there could have been an express easement, but presumably the lack of a writing would have been determinative. The Appellate Division concluded that the tenant’s use of the overhang resulted in a revocable license, not an easement, because the tenant paid no consideration, did not expend a significant amount of money, or worsen its position in any way in reliance on a belief that it had a right to continue this use. A license is a revocable privilege to use the land of another in some specific way. The Court also failed to find facts showing that the landlord waived its right to prevent use of the overhang. The landlord simply gave permission, which does not constitute a permanent waiver of the right to revoke that permission at a later date. The Court enjoined the tenant from using the space below the overhang and the awning for the display of merchandise. Next, the Court increased the compensation award to the landlord after holding that there was no reason to award it less than the orally agreed-upon amount of $5,000 per year for the tenant’s use of the space under the awning.

Finally, the Court considered whether the lower court should have declared a forfeiture of the leasehold. Controlling precedent states that language which may defeat an estate must be strictly construed against forfeiture if there is any ambiguity in the forfeiture clause. The Appellate Division found sufficient ambiguity to deny termination. Specifically, even though the forfeiture clause stated that there is a default if there is a breach of “any of the obligations hereunder,” this clause appeared after recitation of the tenant’s most essential obligations, but before the paragraph prohibiting encumbrance of the boardwalk. The Court felt this could be interpreted to mean that there is only a forfeiture if one of the prior clauses is breached. To support that reasoning, the Court found other paragraphs after the forfeiture clause that it felt were not meant to be covered by the forfeiture clause despite its broad language, such as tenant’s obligation to cooperate in a $200 advertising campaign.