2B — May 29 - June 11, 2015 — Owners, Developers & Managers — M id A tlantic
Real Estate Journal
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O wners , D evelopers &M anagers By Jerry A. Nelson, Stark & Stark Landlord wins lawsuit due to good lease and guaranty
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T
he New Jersey Appel- late Division recently issued an unpublished
tenants and guarantor liable for a judgment in the amount of $324,119.20 plus costs because the lease and guaranty were clear and unambiguous. The case was affirmed on ap- peal. The case is important for landlords to ensure successful collection against defaulting tenants and guarantors. This case involved a breach of a commercial lease by ten- ants and a guarantor that failed to pay rent. The initial lease was for a primary term of 10 years. The tenants had the option to renew the lease for two additional five-year
continued on page 3B The guarantor argued that the guaranty expired at the end of the first five years of the lease because the landlord did not give notice of a default during such five year period. The trial court disagreed with the guarantor and granted summary judgment to the land- lord. The trial court stated that “guaranty agreements should be strictly construed” and found that this guaranty was “clear and unambiguous” and “did not require a notice of default”. The trial court then found that since tenants were in default, the guaranty did not expire and continued throughout the remaining years of the lease. The Appellate Division also agreed with the landlord and affirmed the trial court. The Appellate Division added that the landlord was also not re- quired to send a notice of default since the separate remedies available to landlord were “cumulative rather than exclusive”. The Appellate Divi- sion then rejected guarantor’s argument that the guaranty was no longer binding since the parties failed to specifically ref- erence guarantor’s continued obligation to guaranty the rent payments in the lease amend- ments. The Appellate Division found that the lease amend- ments did not modify or extin- guish the guarantor’s promise to personally guarantee, and each lease amendment stated, “[e]xcept as modified herein, all of the terms, covenants and provisions of the [original] Lease are hereby confirmed and ratified and shall remain unchanged and in full force and effect.” extended terms. The lease contained a limited personal guaranty, which stated that “on the condition that Lessee is not in default of Base Rent, Additional Rent or any other term or condition of the Lease, this personal guaranty shall expire and become void at the end of the Fifth Lease Year”. At the conclusion of the Fifth Lease Year the tenants were behind in rent. Although the landlord did not then declare a default, it later instituted a repossession action. After the parties entered into two lease amendments, and rent was unpaid, the landlord filed a complaint in the Law Division to recover the arrears, and the parties moved for summary judgment.
decision that shows that good leases and guaran- ties can help l a n d l o r d s ma k e a n d save money. H L P A s - socs., L.P.
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v. Carpet City Inc., Et Al ., A- 4134-13T3 (App. Div., March 17, 2015). The trial court grant- ed landlord’s motion for sum- mary judgment and found the
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