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Strober-Haddonfield Group, Inc. v. Norpak Corporation

A-2247-03T3 (N.J. Super. App. Div. 2004) (Unpublished)

LEASES—Although a tenant may deal with its landlord’s designated employee as the landlord’s primary contact, that person may not be authorized to act as the landlord’s agent.

After the term of a commercial lease ended, the tenant asked for return of its security deposit. The landlord refused, instead retaining the deposit to offset unrepaired damages to the leased premises and for additional rent it claimed it was owed by reason of the tenant’s untimely submission of proof of compliance with the Industrial Site Recovery Act (ISRA). The lower court granted the tenant’s motion for summary judgment, finding that it had completed all necessary repairs and was exempt from submitting proof of compliance with ISRA because the non-industrial tenant was not subject to ISRA.

On appeal, the landlord contended that its own employee, who performed a final inspection of the premises, did not have authority to do so. Its employee performed several walk-throughs of the premises, listing the repairs that were needed. He then approved all of the repairs after their completion. The employee was the landlord’s most senior employee and had daily access to the premises. He was also the primary contact between the tenant and the landlord. Therefore, because the landlord’s employee approved the repairs, the tenant claimed that it was entitled to the full security deposit. The landlord argued that its employer lacked authority to approve any repairs and that the landlord never did anything that would justify the tenant to conclude that its employee had such authority. The employee testified that the tenant had to deal strictly with the landlord’s main office. For example, whenever it had a problem, he told it to contact the landlord’s main office first, and then he would take care of it only if the office called him and authorized him to do so. He stated that before he was authorized to do anything, the landlord would have had to give him authorization.

The Appellate Division held that apparent authority must be based upon the manifestations of the principal, not the agent. Although the landlord charged the employee with the responsibility of acting as the primary contact between the tenant and landlord, there was no other evidence that the landlord did anything to make it appear that the employee had the authority to conduct the final inspection or approve the repairs. Even the employee testified that he had no such authority. The Court noted that the employee had signed a paper that stated, “Listed Below Is The extent of The Work That [the landlord] Feels Has To Be Done,” indicating that six repairs had been completed. However, the employee testified that he signed the list with only those six repairs because he thought the list merely confirmed that those items that had been repaired. Finally, the employee explained that no one else from the landlord’s main office performed a final inspection because the tenant had told him that it would contact the main office about arranging a final walk-through. In contrast, the tenant argued that the landlord ratified the employee’s actions by never contacting it and by never refuting the employee’s authority to conduct the inspections. Based on the conflicting evidence, the Appellate Division concluded there was a factual dispute as to the employee’s authority and as to unrepaired damages. For that reason, the Court reversed the lower court’s summary judgment for damages.

As to the ISRA issue, the Court found that approximately four days after the lease term ended, the landlord requested that the tenant submit, as soon as reasonably possible, proof of compliance with ISRA. There, a dispute arose as to whether compliance with ISRA was required because the tenant was not an industrial establishment. About one month after the lease term ended, the landlord suggested to the tenant that the proof of compliance may involve a simple letter of nonapplicability which it could request from the NJDEP. Approximately one month later, and two months after the lease term had ended, the tenant supplied the requested nonapplicability letter. The landlord then sought to collect two months’ rent for the time it took the tenant to provide the letter. The Court, however, found no evidence that the landlord intended to sell or lease the property during those two months, or that the tenant’s delay caused any damage or prejudice to the landlord. Thus, even if the tenant’s conduct was a breach the lease, no reasonable jury would conclude that the breach was material. Therefore, the Court affirmed the lower court’s summary judgment that no rent was payable for the period between the end of the lease term and when the nonapplicability letter was furnished to the landlord.

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