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Pearlmont, LLC v. The Waterfall, Inc.

A-5057-09T1 (N.J. Super. App. Div. 2011) (Unpublished)

LEASES — Where a lease is silent as to whose responsibility it is to obtain municipal permissions, a court must assess the available extrinsic evidence to ascertain whether it reveals the intent of the parties with respect to that issue.

A lease provided that a restaurant tenant was to use the property to park up to 30 cars. There was no mention of the need for municipal permission for the parking, and there was no allocation of any obligation to obtain such permission. At some point, a planning board noted there was no approval for parking on the property. The tenant stopped paying rent. Instead, it offered to pay a reduced rent. The landlord sent monthly letters demanding payment and also rejected the tenant’s request for lower rent.

The landlord then sued for unpaid rent, late fees, and rent for the balance of the lease. After the landlord initiated an eviction action, the tenant surrendered the property to the landlord. At a deposition, one of the tenant’s principals testified that he had informed the landlord that the planning board requested an application for parking approval. He subsequently informed the landlord that the lease was illegal due to this and refused to pay rent. The tenant argued that the landlord was responsible for filing the application; however the landlord argued that it was not his responsibility.

The landlord filed for motion for summary judgment and the tenant filed a cross-motion for summary judgment, arguing that the lease was unenforceable. The lower court judge denied the landlord’s motion and granted the tenant’s cross motion, finding that the landlord committed a material breach by failing to deliver the minimum of 30 parking spaces as stated in the lease.

The landlord appealed, claiming that the lower court erred in refusing to consider extrinsic evidence on the issue of which party was obligated to obtain the municipal approvals. In the appeal, the Appellate Division found that the lease contained no representation as to municipal approval for such use and was silent on the issue of who was responsible to obtain the approval. It found that, in this kind of case, courts must seek to ascertain the intent of the parties from the available extrinsic evidence. Contractual interpretation requires courts to give “juristic effect” to the intention of the parties as expressed in the contract. A court is to analyze the language of a lease when determining the parties’ intent. The admission of extrinsic evidence is for the purpose of interpreting the writing, and not for the purpose of modifying or enlarging its terms; it is simply an aid in determining the meaning of what has been said. The evidence must only be used to show an intention wholly unexpressed in the writing.

In this case, the lease stated how the tenant could use the property, but nothing as to who needed to get the municipal permission for such use. The Court concluded that in such cases, a court must first assess the available extrinsic evidence to ascertain whether that evidence will reveal the intent of the parties with respect to those issues. If this analysis does not help, then the court can use the rules of construction to provide missing terms. In that regard, the Court held that the lower court had erred in interpreting the lease without examining the extrinsic evidence. The matter was remanded.

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