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Uygur v. Bell Environmental Consultants, Inc.

A-5655-06T1 (N.J. Super. App. Div. 2009) (Unpublished)

LEASES; ORAL MODIFICATIONS; STATUTE OF FRAUDS — The statute of frauds applies to any purported modification of a lease of more than three years and oral modifications will not be enforced unless proved by clear and convincing evidence.

A tenant leased premises in a commercial building for seven years. During the term, the tenant fell behind in its rent payments. The tenant sent the landlord several letters admitting that it was late in paying the rent and offered proposals to settle the matter. The parties were unable to reach an agreement and the landlord sued to recover the unpaid rent. It submitted the letters sent to it by the tenant and invoices from tenant which indicated that the amounts paid were only a portion of what was actually due. The tenant denied the allegations and asserted several affirmative defenses, including waiver, estoppel, and laches. It also alleged negligent misrepresentation and fraud by the landlord and claimed that the landlord orally modified the lease when one of the landlord’s representatives told the tenant that it would accept any amount the tenant could pay in return for the tenant remaining at the premises. No written modification was ever executed.

The lower court dismissed the tenant’s claim that there had been an oral modification of the lease and awarded damages to the landlord for the amount of rent in arrears. It noted that the lease expressly prohibited any oral modifications and that the tenant had acknowledged back rent due and owing in its letters. The tenant appealed, but the Appellate Division affirmed. Although it agreed with the tenant that the lower court erred in ruling that the lease could bar any oral modification since the parties could agree to disregard these provisions, it stated the Statute of Frauds required a lease of real estate for more than three years to be in writing signed by or on behalf of the party against whom enforcement is sought, or alternatively, proved by clear and convincing evidence. It further concluded that the Statute of Frauds applied to any purported modification of a lease of more than three years. Here, the lease was for a term greater than three years and was clearly subject to the statute. In addition, the Court ruled that in view of the written communications between the parties regarding the tenant’s rental obligations, the alleged oral modifications were not “proved by clear and convincing evidence.” Therefore, the modification had to be established by a writing signed by or on behalf of the landlord, which was not the case here. Moreover, the claims of waiver and estoppel were rejected because the Court determined that they could not be expansively applied in a manner that subverted the operation of a Statute of Frauds. The Court also stated that the tenant could not cite any authority for the proposition that a party’s forbearance from breaching a contract could provide a foundation for finding a waiver or estoppel. Finally, the Court concluded that the tenant’s assertion of an oral contract was so inconsistent with its own records and correspondence as to preclude a “genuine issue of material fact.”

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