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Mort’s Family Group, L.L.C. v. Huang

A-2686-10T4 (N.J. Super. App. Div. 2011) (Unpublished)

LEASES; DAMAGES — Where a lease both requires a tenant, at the end of its lease, to restore the premises to its original condition and also requires the tenant to maintain the heating, ventilating and air conditioning units, a court will read the lease in a fair and common sense manner and not require that the HVAC system be returned to its original condition, only that it be returned in good condition, subject to reasonable wear and tear.

A commercial tenant rented space in a shopping center to operate a restaurant. The lease required the tenant to surrender the leased premises at the end of the lease term in good condition and repair, reasonable wear and tear excepted. The lease also provided that, at least thirty days prior to the end of the lease term, the tenant was required to find out from the landlord if it desired to have the premises restored to its original condition, and, if the landlord did so desire, to restore the premises to that condition at the tenant’s cost and expense.

After the tenant vacated the premises, the landlord provided the tenant with a list of repairs, the cost of which it deducted from the security deposit. The landlord deducted sums to repair the sprinkler heads, to close holes made in the roof to provide ventilation for cooking equipment, and to restore the three HVAC units to their pre-lease condition. After deducting those costs from the security deposit, the landlord sued the tenant for the balance of the repair costs. The tenant countersued for double its security deposit pursuant to the Security Deposit Act, N.J.S.A. 46:8-21.1.

The lower court found that since the lease in question was a commercial lease, the Security Deposit Act was not applicable. Therefore the tenant was not entitled to twice the amount of its security deposit. The lower court also found that the tenant was responsible for repairing the sprinklers and closing the holes in the roof. However, it rejected the landlord’s claim that the tenant was responsible for the cost of restoring the HVAC units to their original condition. It found that the repair provisions of the lease only required to maintain the units in good condition, normal wear and tear excepted, but the lease did not require the tenant to make capital improvements to the property. In this case, the tenant was not responsible to restore HVAC units that were over twenty years old and were worn out. The landlord appealed and the Appellate Division affirmed.

The landlord argued that the tenant was required to fix the HVAC units under the lease provision requiring the tenant, at landlord’s election, to restore the premises to its original condition. The Court noted that contracts are to be read and interpreted in a fair and common sense manner. The Court agreed with the lower court’s finding that the tenant was not obligated to repair the HVAC units since the lease required the tenant to surrender the premises in good condition subject to reasonable wear and tear. The Court rejected the landlord’s contention that the lease required the tenant to make repairs when the landlord elected to have the premises restored to its original condition. It also found that the provision relied upon by the landlord only applied to those alterations or improvements made by the tenant. It refused to extend that obligation to the repair or restoration of the HVAC units. It found that interpretation was unreasonable and would vitiate the “reasonable wear and tear” exclusions from the tenant’s repair obligations.


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