Commercial, Retail & Industrial Real Estate

The National Association of Homebuilders released a report, consistent with our predictions, indicating that approved lots ready for construction are a scarcity. 62% of builders indicate that the supply of developed lots is low or very low. This phenomenon, at record levels since at least 1997 when records were kept, is likely due to the great recession. For the most part, developers retrenched during the great recession and did not seek approvals for new developments. Instead, they hoarded cash in an effort to position themselves to come out of the great recession or for simply survival.

Unfortunately, few, if any, developers were in a position – or thought it wise – to be investing in approvals for projects for future development. This problem is likely exacerbated in New Jersey where development approvals, particularly for larger developments, can often take two to four years. As the recession subsided, developers in a position to do so typically bought up approved developments and/or brought already approved projects they owned off the shelf for development.

Prior to the great recession – and one could argue it was a depression for the real estate market – developers were largely building homes in New Jersey as fast as they could get them approved. Accordingly, there was not a glut of unbuilt lots. Once developers stopped spending money on future development once the recession hit, we found ourselves in the position we are today. The scenario was predictable.

Interestingly, much of the development in the future may be inclusionary development (including a set-aside for affordable housing) that will arise as a result of the groundbreaking affordable (Mt. Laurel) housing decision in March by the New Jersey Supreme Court. We addressed the affordable housing decision in a previous blog post, which you should definitely check out.

As you are undoubtedly well aware, the March 10, 2015 ruling from the New Jersey Supreme Court stripping the Council On Affordable Housing (COAH) of their oversight of the constitutional obligation of every municipality in New Jersey to plan for and accommodate affordable housing has effectively changed the rules for all of us.

The Rules Have Changed!
Not only have nearly 400 New Jersey municipalities been put on notice that they must submit suitable plans for affordable housing to the Courts by July 8, 2015; but this ruling gives builders and developers legal remedies (outside of the administrative appeals process within COAH) with which to compel these municipalities to comply. If you have a property/site that you believe is suitable for affordable housing, the time to act is now.

For your convenience, here is a breakdown of the ruling and the implications for owners and developers in a video podcast Q&A.

https://www.youtube.com/watch?v=7T978BBWm8g

How Can We Help?
Stark & Stark’s attorneys are prepared to leverage our relationships at the municipal level along with our intimate understanding of the zoning and land use process to help get your sites included in municipal affordable housing plans. Our litigators are also ready to counsel you on the legal remedies at your disposal if/when your property/site is excluded from an affordable housing plan. Don’t wait until it’s too late.

Various sources, including NJBiz, have reported that Mayor Fulop and Jersey City are pushing forward an ordinance largely prohibiting chain businesses, i.e., any business that has 10 or more locations within 300 miles from the City. If challenged, will the ordinance pass legal muster? Arguably not.

Generally land use ordinances must advance the purposes of zoning. Anti-competitive ordinances have historically and repeatedly been stricken by the Courts in New Jersey, for instance, distance regulations between competing businesses (e.g., a zoning ordinance that would purport to require at least 1500 feet between fast food restaurants or other uses otherwise permitted in the zoning district). Thus, in this instance, a chain located on the West Coast, such as In-N-Out Burger (whom ironically said it would not expand to the East Coast due to supply chain challenges) could locate in Jersey City, but Macy’s, Starbucks, Dunkin Donuts, Home Depot, and numerous other well-known chains would be prohibited from opening in most of Jersey City (excepting some areas of the waterfront).

Mayor Fulop asserts that the restrictions will keep the City “livable and desirable” and allow the City to “reflect diversity and spur creativity.” If challenged, the City and Mayor will have to convince the court that these considerations are valid land use objectives advancing the purposes of zoning. Cities such as San Francisco, California, and Nantucket Massachusetts, have enacted similar ordinances, but the authority for the Jersey City ordinance must pass muster under New Jersey’s Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq., in order to survive a challenge.

This is definitely an issue we’re going to keep an eye on and will continue to update you as it develops.

The New Jersey Appellate Division recently issued an unpublished decision that shows that good leases and procedures can help landlords prevent problems as well as make and save money. Rondell L. Thurman, Et Al vs. Lindenwold Center LLC., A-5364-12T4 (App. Div., March 9, 2015). The trial court dismissed claims of tenants because they were litigated in a prior action in which the landlord sought to collect past-due rents from the tenants.

The case was affirmed on appeal. The case is important for landlords to ensure successful collection and protection against defaulting tenants, especially ones that try to file claims against landlords.

This case involved a breach of a shopping center lease by tenants that failed to pay rent. The landlord filed a summary dispossess action seeking a judgment for possession against tenants due to their failure to pay rent. The landlord then obtained a consent judgment pursuant to which tenants agreed to the entry of a judgment of possession, to vacate the premises, to make a payment, and to surrender their security deposit. The tenants then vacated but failed to pay and the landlord filed a complaint in the Law Division.

The tenants filed an answer alleging that an eminent domain action caused the nullification of the lease and also asserted a counterclaim seeking the return of their security deposit and monetary claims. The landlord moved for summary judgment. The trial court granted the landlord’s motion and entered a judgment against the tenants.

The tenants then filed an action against the landlord seeking damages in the Law Division. The allegations of the tenants included claims that the landlord breached the lease and committed fraud by failing to inform the tenants of a taking or condemnation. The landlord moved to dismiss the complaint arguing that it was barred by res judicata, collateral estoppel, and the entire controversy doctrine. The trial court agreed with the landlord and dismissed the complaint. The trial court found that all of the allegations of the current action were conclusively determined in favor of the landlord in the prior action.

The Appellate Division also agreed with the landlord and affirmed the trial court. The Appellate Division added that “the entire controversy doctrine embodies the principle that the adjudication of a legal controversy should occur in one litigation in only one court”…and the entire controversy doctrine also “serves the purpose of providing finality and repose; prevention of needless litigation; avoidance of duplication; reduction of unnecessary burdens of time and expenses; elimination of conflicts, confusion and uncertainty; and basic fairness.” The Appellate Division then found that because the tenants had litigated the eminent domain issue, they were precluded from doing so again.

For landlords, this decision illustrates that the entire controversy doctrine is a powerful tool in New Jersey and also shows the importance and value of preparing good leases and following proper procedures, both before and during litigation. Although the decision does not reveal the lease or the consent judgment that were signed by the tenants, it is likely that both documents were properly prepared in order to persuade the court to grant the landlord summary judgment. And by quickly obtaining summary judgment, the landlord was able to make and save money.

Do you have the lease and procedures you need to win a lease dispute? Further, should your lease and procedures be improved and updated to maximize your opportunities for recovery for a breach and minimize your risks of loss if you breach? Evaluating your legal issues and addressing them correctly, requires careful review on an individual basis. It is also vital to have counsel familiar with these issues for your commercial, retail, industrial and/or residential property needs.

Shopping centers are thriving much to the apparent surprise of the media, which has been predicting a demise of centers as we know them, including malls. An interesting article in Shopping Centers Today, a publication by the International Council of Shopping Centers (ICSC), is based upon a report by ICSC. Unfortunately, the article cannot be linked as it is member only access. Growth not despite e-commerce, but in part due to e-commerce. Various historically online retailers, including Amazon, are opening brick and mortar stores and finding those customers are spending substantially more than online customers. Malls and other shopping centers are repositioning themselves for convenience, creating an experience to increase dwell time or going upscale. Moreover, changing demographics and the slowed pace of growth of new centers are all adding to the current success and anticipated growth of existing centers. Do not sell your stock in retail centers just yet!

On October 16, 2014, the Appellate Division issued a case for publication concerning a tenant’s right to transfer a non-payment eviction matter to the law division. The Appellate Division in Bejoray, Inc. v. Academy House Child Development Center, A-5161-12T3 held that a tenant’s request to transfer an eviction matter, when it asserted claims for negligent misrepresentation and breach of contract for damages and rescission of the lease, should have been granted. This case is very important for commercial landlords in New Jersey as it raises a number of issues that should be addressed prior to proceeding with an eviction action. Continue Reading Commercial Tenant Appeals Judgment of Possession and Obtains Transfer to Law Division Based on Square Footage Discrepancy

Whether you’re a real estate developer, owner and/or landlord of commercial, retail, industrial or residential property, you know compliance with state and municipal laws is key to operations. If you fail to comply with existing laws, you can suffer penalties, losses and setbacks. This maxim was recently illustrated for a landlord that had its eviction case die for failing to legally comply with New Jersey notice requirements to evict.

In the unpublished decision Cahn Estates v. Sanchez , 27-2-4190 (App. Div. 2014), a residential landlord had its judgment of possession reversed – effectively keeping a tenant that it evicted – because notice requirements were not strictly followed.

The case involved a 17-year tenant with a 20 pound, 10-year old dog that repeatedly used the hallway as its bathroom, barked at other tenants and lunged at a property manager. Although landlord served tenant a Notice to Terminate the tenancy after the tenant’s dog lunged at the landlord’s employee, landlord did not send a timely Notice to Cease, as required under the New Jersey Anti-Eviction Act (the “Act”), prior to sending the Notice to Terminate.

Landlord filed an eviction complaint, seeking judgment for possession as a result of threats against landlord representatives and a disorderly/destructive tenant. The trial judge found that the “threatening conduct” of tenant constituted both simple assault and terroristic threats. The Judge granted landlord a judgment for possession. Subsequently, landlord and tenant entered a consent order to allow tenant to stay until the end of the month, but presumably did not acknowledge the prior judgment of possession and/or waive any rights under the prior judgment. Once a warrant of removal was filed, tenant filed an Order to Show Cause to stay eviction.

Although the trial judge denied tenant’s Order to Show Cause, tenant appealed. Tenant claimed that under the Act, the trial court did not have jurisdiction to enter a judgment for possession because the landlord did not send a timely Notice to Cease, prior to the Notice to Terminate.

The Appellate Division agreed with the tenant, stayed eviction, reversed and vacated the judgment for possession. The Appellate Division held that the Act requires strict compliance, noting that the purpose of the Act was to protect tenants in the midst of a housing shortage and avoid hardship of rendering tenants homeless by a blameless eviction. Citing, Morristown Mem’l Hospital v Woken Mortg. & Realty Co., Inc., 192 N.J. 182 (App. Div. 1983).

The Appellate Division held the Act allows for a Notice to Terminate, without a Notice to Cease, if an offense includes “terroristic threats”. However, the Appellate Division held that the evidence did not support such a finding – basically, this little dog in no way could have “terrorized” anyone. Further, the Appellate Division held that the Notice to Terminate was not specific, since the Notice did not include the word “assault” as a ground for eviction. Thus, the landlord/tenant judge had no jurisdiction to even hear the eviction. In addition, the Appellate Division held that the subsequent consent order did not waive tenant’s right to contest the prior order and its validity.

In short, this decision illustrates not only the need to ensure compliance with New Jersey law when operating commercial, retail, industrial or residential property, but also the importance of trying to avoid issues, whether at the pre- or post-litigation stage.

Some interesting questions that you should ask your real estate counsel include:

  1. Prior to litigation, are your notices correct? For instance, if you are sending a Notice to Terminate, rather than a Notice to Cease first, do you have all appropriate language that addresses specific offense?
  2. Are there other alternatives that can be sought without cost to landlord? For instance, in this matter landlord may have been able to contact the police or animal control if it believed there were public safety issues.
  3. If you’re resolving an issue at or before trial, does your standard consent order contain a waiver of tenants’ rights to appeal?
  4. Does your consent order provide a warranties and representations clause that the tenant has read and understood the agreement?

Evaluating your legal issues and addressing them correctly, requires careful review on an individual basis. Further, it is vital to have counsel familiar with these issues for your commercial, retail, industrial and/or residential property needs.

There’s a big demand for multi-family and mixed use properties in New Jersey. Savvy owners have an opportunity to provide valuable housing and make a good profit at the same time. However, New Jersey has very strict residential leasing laws. If you violate these laws when leasing and operating properties, you can lose money and suffer civil, as well as possible criminal penalties. The good news is that adept counsel can help you to comply with these residential laws.

 

The Truth In Renting Act

In New Jersey, residential landlords are required to strictly comply with New Jersey’s Truth In Renting Act (the “Act”).  The Act requires landlords to give a copy of a current statement to each tenant when a lease is entered into, and to make available the current statement in the building where the tenants can easily find it.  Landlords should also keep documentation or receipts verifying distribution of the statement to tenants.  The current statement contains many pages and generally outlines information about the lease, security deposit, discrimination, safety, health and many other issues related to a rented home including, without limitation, information related to child protection window guards, carbon monoxide and smoke detectors, and lead-based paint disclosures. The Act requires the New Jersey Department of Community Affairs to prepare, distribute, and update annually a statement in English and Spanish of the established rights and responsibilities of residential tenants and landlords in New Jersey.  Since landlords must distribute the current statement within 30 days after the Department of Community Affairs makes it available, it is important to keep up with any changes to comply.

 

Security Deposit Act

Residential landlords in New Jersey must stringently comply with New Jersey’s Security Deposit Act to avoid criminal and civil penalties, including imprisonment, fines, and penalties such as having to pay double the security deposit, plus attorneys’ fees and costs.  The Security Deposit Act includes many requirements, and the following is a general summary of only a few of the requirements, which are described in more detail in the Security Deposit Act.  First, within thirty (30) days of receipt of the security deposit and at the time of each annual interest payment (which tenants are entitled to receive as described in the Truth In Renting Act and Security Deposit Act) the landlord must notify the tenant in writing of the name and address of the banking institution or investment company at which the money is deposited, the amount of the deposit, type of account and current rate of interest for the account.  Second, the landlord must notify the tenant within thirty (30) days of transferring the security deposit money to a new landlord or moving the security deposit to another account or bank.  Third, a landlord must return the security deposit, plus interest earned less permitted itemized deductions, to the tenant within thirty (30) days after the end of the tenancy.  Fourth, security deposits may not exceed one and one half (1½) month’s rent. Fifth, landlords are not allowed to take administrative expenses from the security deposit money.

 

Abandoned Tenant Property Act

In New Jersey, rigorous compliance with New Jersey’s Abandoned Tenant Property Act is mandated by landlords.  The Abandoned Tenant Property Act applies to any property left in premises.  It is important that the Abandoned Tenant Property Act be adhered to, and procedures should be developed with counsel to ensure compliance. For instance, once an eviction occurs or tenant leaves a 33-day notice letter should be sent to commence the clock running for the New Jersey Abandoned Tenant Property Act.  Additionally, you may want to consider including adequate language to reduce risks in leases, checking if other parties have rights to abandoned property and obtaining waivers to the extent permitted by law.

 

New Attorneys’ Fee Law

In New Jersey, residential and commercial leases must expressly permit attorneys’ fees, late charges and other charges as “additional rent” in order for a judge to consider those expenses as additional rent in a summary dispossess proceeding. Even if the lease permits recovery, such charges may be prohibited by applicable law.  Additionally, if a residential lease permits the landlord to recover attorneys’ fees and expenses, new additional language is required in New Jersey in order to permit recovery of attorneys’ fees and expenses as of February 1, 2014 as provided in the new law.  You will be grandfathered in under the old law if you do not have the “new” attorney fees language in an existing lease.  However, this new language must be in any renewals as of February 1 (i.e. tenants lease runs out May 1 and they want to renew, you have to provide them a lease with this language as a renewal).  Here is a link to a blog with more details regarding the New Residential Lease Language Required to Collect Attorneys’ Fees.

 

Other Laws

In addition to strictly complying with the above laws, landlords in New Jersey must also adhere with all other applicable federal, state, and local laws and requirements, including, without limitation, the Fair Debt Collection Practices Act,  New Jersey Consumer Fraud Act, environmental laws, employment laws, and all other applicable notice, registration, Certificate of Occupancy, land use, construction, disclosure, and other requirements, including all required court eviction procedures, such as obtaining a Judgment for Possession in court and a Warrant of Removal executed by a court officer.  It is important to consult counsel since “self help” evictions are illegal and if you fail to strictly comply with all required legal notices, procedures and deadlines, deal with defenses, and handle hearings, you can lose your rights and suffer civil and possible criminal penalties.

 

Obtain Outside Counsel To Comply With Laws

These are just a few landmines to avoid when leasing and operating multi-family and mixed-use properties.  Evaluating these issues requires careful review on an individual basis.  Having an attorney familiar with these issues is critical in ensuring that you do not violate laws.

Having the right waiver and release can help you to quickly save money and find peace.  If you fail to obtain a required waiver or release, you can suffer from liens, disputes and lawsuits.

Black’s Law Dictionary states that a waiver or release involves giving up or abandoning of a claim or right.  Often, waivers and releases are included as part of settlement agreements.  Since it is also possible to give up claims and rights by conversations or conduct, it is essential to ensure that you do not unintentionally lose your claims and rights.  Waivers and releases can also be contained in other documents and good leases, construction contracts, and other agreements will include lien and claim waivers and releases.  In addition to obtaining releases, it is important to obtain both lien and claim waivers, since simple lien waivers may not prevent the filing of claims.  

Waivers and Releases Can Cut Costs 

Waivers and releases can help you to quickly prevent liens and claims, and resolve disputes and lawsuits.  They can also save you time and money by deterring defaults with tough language to inspire compliance, such as increasing payments and attorneys’ fees and costs for violations.  Waivers and releases are effective at cutting costs and reducing risks because they are generally enforced when they are voluntarily and properly prepared and exchanged unless there is a defense to the making of the document, or they are prohibited by laws, such as laws relating to residential tenants and consumers.  It is also important that documents be exchanged at the right time.  For example, construction lien and claim waivers may not be enforceable if they are not exchanged when required by law.  Similarly, certain rights and judgments may not be enforceable unless they are obtained to settle a pending claim, such as an eviction action.  In order to fully benefit from these valuable documents, it is essential to consider all possible issues, including all potential parties (such as subsidiaries and affiliates, officers, directors, shareholders, partners, employees, agents, members, managers, successors, assigns, heirs and personal representatives) and all potential issues (including past, present, and future claims, demands, actions, causes of action, suits, debts, sums of money, promises and damages, regardless of whether asserted, unasserted, known or unknown). 

Waivers and Releases Can Create Opportunities  

Well drafted waivers and releases can also grant you additional new rights to help you reach your current and future goals.  For example, they can be used to quickly obtain missing rights, such as rights to develop and improve properties.  They can also be used to creatively and quickly resolve other issues that you may not be willing or able to cost-effectively resolve at a trial, such as other current problems, future potential problems and payments, confidentiality, jurisdiction, venue, and governing law. 

Obtain the Waivers and Releases You Need

It is critical to consult counsel to ensure that you have the waivers and releases you need to succeed.  Many issues must be addressed, including what waivers and releases you need, when you need them, and if and when they are enforceable.

Stark & Stark Shareholder Thomas S. Onder co-authored the article titled “Spring Cleaning for Landlords: Cost Saving Tips in Light of Winter Woes” which was published by Shopping Center Business on March 13, 2014. The article discusses the various steps that landlords take to manage costs when recovering from a pricey winter season; much like this one.

Mr. Onder discuss the importance of having qualified experts inspect your property to assist in reducing damages. Additionally, it is crucial to trim your repair costs and common area maintenance costs by extensively reviewing documents and negotiating to decrease those costs. The article also says, “A tax appeal can reduce your property costs and help you and your tenants survive and thrive.”

To read the full article, please click here.