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Stefan v. PriceWaterhouseCoopers, LLP

A-1622-03T5 (N.J. Super. App. Div. 2005) (Unpublished)

LEASES; CONSTRUCTIVE EVICTION; NOTICE—Where a tenant fails to gives its landlord notice of a defect and an opportunity to cure as provided in their lease, no constructive eviction can be founded upon that defect.

A landlord sued its tenant for breach of their lease. After the lower court ruled in the landlord’s favor, the landlord appealed in an effort to retrieve “certain costs incurred to mitigate damages,” to reverse the lower court’s granting of credits to the tenant, and to reverse the reduction of the landlord’s “claim for attorneys’ fees and costs.” The tenant cross-appealed, asserting that the lower court erroneously: 1) found that it had “breached the lease by abandoning the premises and failing to pay rent;” and 2) barred mitigation evidence pertaining to the property’s potential sale.

The facts showed that the tenant vacated the premises after its own architect said that structural defects in the building rendered it unsafe for occupancy. Thereafter, the tenant told the landlord that it had been constructively evicted since the landlord was in “default under the terms of the lease” by failing to comply “with all applicable laws,” make “all capital repairs,” and ensure the tenant’s “quiet enjoyment of the premises.” Additionally, the tenant “terminated the lease” and claimed that it owed it no additional rent.

The Appellate Division disagreed with the tenant, finding that there was no constructive eviction since the tenant failed to give the landlord notice of default or any opportunity to cure—as was required by the lease. The Court’s finding was supported by the fact that the structural defects did not effectively destroy the tenant’s “use and enjoyment of the premises.” Regarding the tenant’s assertion that the landlord was required to mitigate damages by selling its property, the Court held that where “a tenant defaults under a lease, the owner is not required to sell the premises in order to mitigate his or her damages[;] ... the owner’s duty to mitigate only requires efforts to re-let the premises.”

Regarding the landlord’s claim to “certain costs incurred to mitigate damages,” the Court found that those costs were recoverable under the lease terms and that the lower court therefore erred in deciding otherwise. As to the credits that the lower court gave the tenant for the time the landlord would have needed to repair the structural defects, the Court found that this was an error since there was no evidence in the record showing that the tenant’s “operations would have been substantially affected by any” of the needed repair work had such been undertaken.

Finally, the Court found that the lower court’s reduction of “attorneys’ fees and costs” was reasonable since the landlord’s attorneys spent more time on the case than was necessary. The Court also found that “[t]he extent of a party’s success may be taken into account in determining a reasonable attorneys’ fee” and since the landlord’s attorneys had billed time for asserting unsuccessful claims, the reduction of the landlord’s attorneys’ fees claim was proper. The Court additionally held that “regardless of the arrangement between” the landlord and its attorneys “the fees and costs billed were not reasonable.”

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