New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

A renewal option contained in a lease agreement can be a vital provision for the success of a business owner.   When negotiating a commercial lease, it is essential that a tenant take into consideration various factors when determining the term of the lease such as the nature of the business, the rent amount and the length of time the business has been operating.  Perhaps the most important factor to consider is the location of the leased premises, which will invariably dictate whether the lease is long term or short term.  If the location is favorable for a particular type of business, a business owner may still be hesitant to enter into a long term lease.  As an alternative, the tenant can negotiate a renewal option, which would give the tenant the option to renew the lease agreement for a specific term by providing notice to the landlord of the intent to exercise the option prior to the end of the initial lease term. 
   

A renewal option may provide a tenant with leverage upon the renewal that is not otherwise available during the initial negotiation of a lease, particularly if the tenant has proven that it is a viable operation that will be a good long term tenant.  Landlords are going to be more willing to make concessions for a good tenant.   The terms of the renewal may be laid out in advance in the initial lease, and the renewal may call for an increase in rental based on the Consumer Price Index, a percentage of the rent, or fair market value of the premises.   If the parties use the fair market value, or a percentage thereof, then the method of determining the fair market value should be drafted into the initial lease.  This will avoid an unnecessary dispute at the time of renewal.  In addition, the timing, who hires the appraiser, and who pays for the appraiser should be specified in the initial lease.   It is also advisable to include what factors may be considered in the appraisal.  For example, a tenant should seek to exclude its installations and fixtures that are to be removed at the end of the lease term from being considered in the appraisal.

When carefully drafted, a renewal option can provide a tenant with flexibility, rather than putting the tenant in a position where the business is incurring the financial risk of a long term lease during uncertain economic times.  Moreover, landlords are typically willing to include a renewal option in a lease, and the renewal may provide the tenant with a method to renegotiate more favorable lease terms.

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In preparing or reviewing an architectural services agreement on behalf of an owner for the design of a high performance building, it is important to negotiate and settle on a standard of care to which the architect will be subject and then make sure that the architect’s professional liability insurance covers any breach of that standard.  Indeed, in designing sustainable structures an architect may be expected to improve health and energy efficiency through architecture and materials selection and to achieve certification under a particular green building protocol, such as the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) Green Building Rating System.  However, the architect’s professional liability insurance policy may not cover the architect’s breach of an elevated or heightened standard of care or a guarantee or warranty related to certification.

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In most eminent domain cases, the government will deposit the pre-litigation offer with the Superior Court of New Jersey shortly after the complaint is filed.  The property owner (or lien holders) is entitled to withdraw the funds without effecting his or her right to seek additional money from the government. If the property owner is successful in recovering additional money (ie., proving the property is worth more than the government’s appraised value), the government must pay interest on any additional money awarded to the property owner.

   

Recently, the Appellate Division reversed a trial court judge who held that the property owner was limited to the judgment rate of interest on the additional award of just compensation.  The property owner wanted to present evidence of a more reasonable rate of interest, (10 year treasury rate plus 290 basis points) which was much higher than the judgment rate of interest.  At stake was an additional $500,000 for the property owner.

   

The Appellate Division agreed with the property owner and held that the judgment rate of interest is not controlling in eminent domain cases.  Rather, the court held that the trial court should have held an evidentiary hearing to determine the applicable rate of interest.  The Appellate Division did not think an evidentiary hearing was not required in all cases and that under certain circumstances, the trial court can make its determination based upon certifications.  However, in this case, an evidentiary hearing was merited.

   

This case is an important decision for larger cases where there are substantial amounts of time between the filing of a complaint and the ultimate conclusion of the case.  In this particular case, the complaint was filed on March 7, 2001, funds deposited on May 3, 2001, but the award was not finally confirmed until March 28, 2008.  The property owner was entitled to just additional interest which accrued over approximately 7 years.

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If you are denied the issuance of a permit on the basis that the proposal violates the zoning ordinance, you may wish to seek an appeal of the zoning officer’s decision.  An appeal of any order, requirement, decision or refusal made by an administrative officer based on the zoning ordinance is brought by an appellant to the zoning board of adjustment. N.J.S. 40:55D-70a.  The review of the decision by the board is to determine whether there was an error under the provisions of the zoning ordinance and applicable statutes.  For example, a zoning officer may refuse to issue a zoning permit because the applicant’s proposal does not conform to a particular bulk standard required by the zoning ordinance.  The zoning board has the power to reverse the decision of the zoning officer and require the officer to issue a permit if the evidence presented to the board supports such result. Nevertheless, if the zoning officer is correct in the decision, then the board must affirm the zoning officer’s action.

When appealing the decision of an administrative officer, an applicant can make a simultaneous application seeking in the alternative variance relief if the board should affirm the officer’s determination.  If the board denies the appeal, then an appeal may be made to Superior Court.  The general rule is that all administrative remedies must be exhausted before seeking relief in Superior Court.  In the context of the decision of an administrative officer, an appellant must first seek relief from the zoning board, before filing an action in Superior Court.  21st Century v. D’Allessandro, 257 N.J.Super. 320 (App. Div. 1992). 
   

Appeals to the zoning board of adjustment from the decision of an administrative officer must be taken within 20 days by filing a notice of appeal with the officer from whom the appeal is taken specifying the grounds of such appeal.  N.J.S. 40:55D-72a.   Failure to adhere to the time for appeal will result in the zoning board not having jurisdiction to consider the appeal.  See Sitowski v. Zoning Bd. Of Adj., 238 N.J. Super. 255 (App. Div. 1990)(the Law Division set aside the board’s consideration of an untimely appeal framed as an interpretation and the Appellate Division affirmed).  All proceedings in furtherance of the matter being appealed are stayed when an appeal of an administrative officer is taken to the zoning board.  N.J.S. 40:55D-75.  However, the officer whose decision is appealed may certify to the board after the notice of appeal is filed with him that a stay would in his opinion cause imminent peril to life and property by reason of the facts stated in the certification, and in such case the proceedings are not stayed.  For example, an appeal by a neighboring property owner of the issuance of a zoning permit would stay the right to build until the zoning board rules on the zoning officer’s decision. 

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A recent case filed with the New Jersey Superior Court in Burlington County on July 19, 2010, captioned Auburn Road Associates v. Alberto & Associates, shows just how important it is to maintain careful attention to detail when designing or planning for a high performance building.  In this case, the plaintiff alleges in its complaint that the architectural and planning services firm it had retained to assist in the planning and development of a 38,750 square-foot shopping center “failed to include energy calculations in the relevant plans for the Woowich Center project.”  The complaint charges the defendant firm with negligence and breach of contract and seeks damages in the amount of $250,000 for delays and expenditures incurred as a result of the alleged omissions.
 

The Auburn Road Associates case may or may not have merit, but it demonstrates the potentially severe consequences that professionals may suffer if they fail to do their homework in preparing plans for improvements that are intended to meet the stringent energy efficiency goals or other “green” objectives of the project owner.

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Vincent J. Mangini, Shareholder in Stark & Stark's Real Estate, Zoning & Land Use Group, authored the article, Environmental Law: Policing Unfair and Deceptive Environmental Product Claims in Advertising, for the July 19, 2010 New Jersey Law Journal.


The article discusses the US Federal Trade Commission's attempts to meet present day challenges when complying with the Guide for the Use of Environmental Marketing Claims. The FTC first issued the Guide in an attempt to assist marketers of products and services having environmental attributes to avoid running afoul of the FTC Act. Since the Green Guides were last updated in 1998, the interest in green products and services has grown tremendously, and therefore, the FTC is struggling to ensure providers are staying compliant with the guides.


You can read the full article online here. (PDF)

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On July 15, 2010, the Appellate Division of the Superior Court of New Jersey affirmed a trial court's ruling that a billboard owned by Lamar Advertising of Penn ("Lamar") is personal property for purposes of eminent domain.  Lamar entered into a lease with the property owner and built a billboard on the property.  When the New Jersey Turnpike acquired the property, an issue arose over whether the billboard was real or personal property.  The court ultimately ruled that for purposes of eminent domain, the billboard is personal property. 

You can read the decision here.

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A person seeking to achieve certification for an energy-efficient structure under a particular green building rating system, such as the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) Green Building Rating System should delegate to a qualified member of the project team the responsibility for assembling, reviewing and managing all required documents and obtaining certification at the desired rating level, as specified in the project manual for the proposed structure.  The architect is often the best person to carry out these tasks provided that the architect is accredited under the green building rating system selected by project owner.

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Gary S. Forshner, Shareholder in Stark & Stark's Real Estate, Zoning & Land Use Group, was featured in the June 2010 edition of the South Jersey Building News, published by the Builders League of South Jersey. The piece discusses some hot topics affecting the real estate today, and highlights Mr. Forshner's active involvement in the real estate industry. You can access the full article online here. (PDF)

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My blog post dated January 28, 2008, provides an overview of the New Jersey Correction of Errors Statute and explains when a property owner is entitled to go back in time and get a refund due to an error made by a tax assessor.  On June 22, 2010, the Appellate Division of the Superior Court of New Jersey once again confirmed the legal principal that an error alone is not enough for relief - the correction must also be self-evident. (See case here)


From 1996 through 1998, a property owner received a 20% credit on the value of her land since the land was encumbered with a conservation easement.  When the municipality completed its revaluation in 1999, it did not consider conservation easements in reducing land values (an obvious error).  In 2005, the municipality performed a reassessment and all land values were substantially increased.  In 2005, the subject property’s assessment went from $222,000 to $479,000, again with no deduction for the conservation easement (the error continues!).


In 2008, the property owner noticed that she was not receiving a reduction or any type of credit for the conservation easement encumbering her property.  On November 26, 2008, she filed a complaint with the Tax Court seeking a reduction for the tax years 2005 through 2008, arguing the error was the type of error subject to correction under the Correction of Error Statute.


The Tax Court and the Appellate Division of the Superior Court of New Jersey disagreed. The Court acknowledged that the municipality’s failure to take the conservation easement into account when assessing the plaintiff’s property was an error in assessment.  However, the Tax Court continued that once the error was determined “it would have been necessary for the assessor to exercise her judgment as to how much that conservation easement would reduce [the land value of the property], that is clearly an error of judgment and not one of correctable error.”


This case underscores the requirement that not only must there be an error, but the correction itself must be “self-evident.”   The only true way to avoid this problem is to diligently review your tax assessments on an annual basis

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