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Rifai & Co., Inc. v. The Port Authority of New York and New Jersey

A-3647-01T1 (N.J. Super. App. Div. 2003) (Unpublished)

LEASES; RENEWAL—A tenant cannot rely on an oral representation that another tenant, having a superior option right to the first, would lose that right by a certain date; such a representation should be included in the first tenant’s lease itself.

A tenant’s lease gave it a renewal option. The renewal right was contingent on: (1) a second tenant in the building not exercising a lease option on that space; and (2) the tenant not being in default of its obligations under its lease. The other tenant exercised its renewal option for the space and the landlord rejected the first tenant’s attempts to renew the lease. The landlord then sued the tenant for possession, claiming, among second things that its tenant was in default for failure to pay rent. At trial, the tenant claimed that the other tenant’s lease option expired so the landlord had to honor its renewal option. It also claimed that it relied on correspondence exchanged during lease negotiations which indicated a date certain by which the other tenant had to exercise its option. The tenant claimed that it relied on that understanding when it entered into its lease. The lower court rejected those claims. It found the correspondence to be inadmissible parole evidence. Although parol evidence may be used to clarify the parties’ intentions and understanding when there are ambiguities in the lease, the tenant’s lease did not reference a certain date by which the second tenant had to exercise its option. It noted that, if the tenant was really concerned about the conditions of the other tenant’s option, it would have required the option date to be stated in its lease. It also would have demanded a copy of the other tenant’s lease. The lower court also found that the tenant was not entitled to renew it lease in any case because the tenant was in default of its lease at the time of its attempted exercise of the option. The Appellate Division affirmed.

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