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An occasional review of fascinating matters in New Jersey law – by Justin Marcus Smith

“I’m not fixing that!”

Sunday 29 May 2016 - Filed under Contracts + Insurance + Landlord / Tenant - Common areas liability + Leases

A recent unpublished (therefore, non-precedential) Appellate Division decision, Herz v. 141 Bloomfield Ave. Corp. (App. Div. 2015), illustrates a typical flashpoint between landlord and tenant, especially commercial landlords and tenants: Who is responsible for what kind of maintenance to the property?

The tenant sued the landlord for “lost profits,” alleging that the landlord had permitted three discrete maintenance problems to harm the tenant’s restaurant business. The alleged problems included: burst pipes for landlord’s failure to maintain the furnace; water shut-off for landlord’s failure to pay the water bill; and municipal shut-down of the restaurant for a discharge of a poorly maintained septic tank.

Maintenance and repair of the roof membrane is especially likely to lead to litigation if the roof leaks into the tenant’s business. The lease should make the landlord and tenant’s respective responsibilities as clear and definite as possible.

As in this case, HVAC (heating, ventilation, and air conditioning) issues are another flashpoint. If your tenant is responsible for heat, have you briefed your tenant that turning the heat off can result in burst water pipes? Some confused tenants, especially those accustomed to warm climates, intentionally turn the heat off as “money-saving” measure. Situations where the tenant has caused thousands of dollars of property damage are usually difficult to resolve. The tenant may not have enough money to compensate the landlord, in which case, a good insurance policy will be the landlord’s only recourse.

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When Is a Signature Not a Signature?

Sunday 29 November 2015 - Filed under Contracts + Contracts - formalities + Leases + Limited liability shield

A recent unpublished (therefore, non-precedential) Appellate Division decision, Herz v. 141 Bloomfield Ave. Corp. (App. Div. 2015), illustrates the danger of getting the signature lines wrong on a commercial lease.

The commercial tenant was a corporation. The corporation’s president signed the lease as “President.” Although the lease contained language specifying the tenant’s president would be personally liable on the Lease, he did not sign the Lease as an individual and there was no signature line for him to sign.

The trial court concluded that the tenant’s president was not personally liable for unpaid rent. On appeal, the Appellate Division agreed with the trial court. The Appellate Division reasoned essentially as follows:

1. Contracts are generally “strictly construed” against the party who prepared the contract;

2. A corporation is generally separate and distinct from its officers;

3. Officers are generally not personally liable for the conduct of a corporation;

4. Even agents who sign on behalf of a corporation are generally not automatically liable on the contract they sign;

5. The tenant’s president did not sign the lease in a personal capacity and there was no signature line for him to do so.

The other facts of this case highlight the kind of complicated litigation that can result when a tenant alleges that the condition of a commercial property harmed its ability to do business and therefore harmed its ability to pay rent to the landlord. Stay tuned for a future blog piece.

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Loan Modification and Foreclosure Workout

Tuesday 5 July 2011 - Filed under debt restructuring

If you are a small business owner, or if you are an investor in income -producing properties, you know just how hard this economic recession has been. If the property you own to conduct your business is generating less income than it was in 2007 and you are struggling to make your mortgage loan payments, you should consider loan modification. If you have missed payments and your bank is about to foreclose, you should consider a loan workout.

There is no reason to wait for foreclosure. Although the number of foreclosures is down slightly in 2011, banks are still struggling with the volume of foreclosures they need to process and the sheer number of resulting “REO” properties (i.e., bank-owned properties) on their books.

Foreclosures are expected to increase in 2012 and to remain a drag on the economy and property values while the market struggles to “clear” through at least 2014. There is a significant danger that if more distressed properties being used to run small businesses are foreclosed, the economy will lose even more small businesses, causing even more unemployment, and, in turn, even more foreclosures. This pattern is also very damaging to the tax base, making it even harder for municipalities and all levels of government to pay their own bills. It is in everyone’s interest to find a less destructive “workout” of the problems in the real property market. Banks have a key role to play by allowing debtors to restructure their debt, thus turning the properties back into “performing assets.”

Banks are beginning to show more flexibility in re-negotiating loans rather than taking ownership of empty properties they may not be able to liquidate anyway. Empty properties are usually harder to sell and are often damaged (e.g., frozen pipes) while waiting for a buyer.

If you are having trouble servicing your debt, do not simply give up and walk away. You have more options now than in years past to delay foreclosure, buy time to get your finances back in order, or to restructure your debt. If you are an employer, you owe it to yourself and to your employees to see if there is some way to renegotiate the debt on your commercial property. You did not cause the recession, but by looking for creative solutions to restructuring debt, you may be able to keep your business property and keep your employees employed.

The above thoughts are general observations only and not meant to be legal advice. The above remarks may not apply to your situation. Please consult an attorney for legal advice specific to your unique circumstances.

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The Paper Chase: Get it in Writing

Sunday 6 March 2011 - Filed under Evidence + Going to Court + Record Retention

With the advent of all kinds of new ways of communicating, whether through e-mail, SMS text messages, or social-networking accounts, it is becoming all-too-common for people and even business entities to find themselves in a legal dispute without hard evidence. This is happening everywhere and seemingly more and more often, from the average consumer in a dispute with his or her phone or cable company, to large, traditionally disciplined, and traditionally competent enterprises such as banks.

“Paperless” billing, “paperless” bank statements, and even “paperless” contracts are a great convenience to all beyond reducing our consumption of the earth’s precious resources. However, these “paperless” modes of doing business lack the type of permanence that ordinary people of average discipline and even businesses of average professionalism need most to protect their rights and preserve potential claims and defenses over the long haul.

Another common issue is the failure to document a dispute appropriately and responsibly as it unfolds. You probably won’t be able to convince a judge that a dispute is not your fault on the basis of having had 18 months of phone conversations with the other side if all you have to show for it is your own testimony: “But I called customer service about 50 times!” Document your interactions. Write old-fashioned hardcopy letters whenever possible that say something like, “Per my phone conversation with your call center agent [NAME] on [DATE], I informed you that I do not owe this money because….” Be sure to state specifically why you think you are right, e.g., the account is closed, or you never ordered the product or service, or what-have you. Include how the other side responded after the prior interaction. Keep and attach their letters to you. Send your letters by certified mail, return receipt requested, or by FedEx, or by some means that offers a verifiable and accepted way to track and document the fact that you communicated with the other side. If you send e-mails, preserve the e-mails, possibly as PDFs, but remember that an e-mail is not quite as convincing and probably less effective than an old-fashioned letter sent through the mail and addressed to the most responsible party to the dispute such as a department manager or business officer.

Most human beings are simply lousy at record-keeping. An individual person’s lack of discipline keeping old-fashioned hardcopy documents is likely to translate into even worse large-scale loss of electronic documents or complete failure to keep any electronic documents at all. Electronic statements or other electronic representations of your dealings and interactions with other people and businesses are simply more likely than old-fashioned paper documents to become misplaced, misfiled, intentionally deleted, or accidentally destroyed by virus or user error, especially with the passage of time and the accompanying replacement and upgrading of computer equipment.

Remember the old adage: “Out of sight, out of mind.” Electronic documents are simply more “out of sight” than the hardcopies you used to keep in your home or office, and therefore they are more “out of mind” when it comes to exercising the discipline required to retain and preserve them over time.

Further contrast the situation with old-fashioned paper documents stored in various locations in an ordinary house or at a brick-and-mortar business premise and the modern, “virtual” alternative. It is far less common for a person or business to lose all of their hardcopy documentation through theft, fire, or other loss of the entire building than to lose all such electronic materials through the loss or destruction of a single computing or smart-phone device.

Although a comprehensive records retention and disaster recovery plan appropriate to your needs is beyond the scope of this article, the following tips may serve as a basic starting point:

1. Capture it: Develop a personal or business plan for retaining important records. Make a list of every business entity you deal with including banks, insurers, cell phone service providers, and so forth. If you get statements or other documents from such entities on a regular basis, make a note of the day of the month the statement is usually issued. Establish some standard electronic filename convention that works for you, such as, “[BUSINESS NAME]_[DATE]_statement”.

2. Convert it: If you have a document in hardcopy form to begin with, consider keeping that original hardcopy in addition to scanning it into a standard electronic format such as the Adobe Acrobat PDF file format. In general, if you have hardcopy documents, it is a bad idea to discard them. Many people have intentionally discarded hardcopy documents after converting them to electronic form, only to lose the electronic copies later, whether by accident or because the conversion was not done properly in the first place. Convert your electronic records, for example, e-mails, to Adobe Acrobat PDF files if they are not already in that form. Adobe Acrobat PDFs are relatively difficult to alter and it is a file format that is likely to remain popular and accessible for many years to come.

3. Preserve it: Make back-ups of your important electronic records on an ongoing basis. Online backup services such as Mozy and Carbonite offer the ability to backup large amounts of data with the added advantage that the backup is off-site. So if a fire, flood, earthquake, or other natural disaster destroys your house or business, your off-site data will probably be unaffected by the catastrophe. Some services provide “snap-shots” of your data over time, so that if your data becomes damaged or corrupted, you may be able to go back to an older copy of the same data. This “snap-shot” feature may also be useful for “version control” and for referring to older versions of the data that are also different from the newer versions in some meaningful or important way.

The key takeaway is that if you find yourself in a Civil court case, you need to prove what you say with something more solid than the mere words that come out of your mouth, reliable as those words may be. Judges find it very difficult to decide cases where it boils down to one person’s word against the other person’s word with no signed written contract, no bills, no letters sent from one party to another, and no other independent evidence of any kind to decide the case. Make sure you can go to court with hard proof that backs up what you say.

Again, the above are only very general recommendations. In some situations, an individual or organization may appropriately choose to discard certain kinds of information on a regular basis as a matter of policy. The recommendations here may not be suited to your particular circumstances and are not intended to be legal advice suited to your particular circumstances. Please consult professionals such as information systems consultants, tax professionals, accountants, or lawyers to develop and execute records retention procedures appropriate to your specific business and legal needs.

See the following IRS and State of New Jersey pages and publications for more information on record keeping and retention:

http://www.irs.gov/businesses/small/article/0,,id=98575,00.html

http://www.irs.gov/publications/p552/index.html

http://www.irs.gov/publications/p583/index.html

http://www.state.nj.us/treasury/taxation/taxtips2011/taxtip0201.shtml

If you are a resident of New Jersey or do business in NJ, including Morris County (e.g., Morristown, NJ; Madison, NJ; Chatham, NJ; Florham Park, NJ, Harding Township, NJ), Somerset County, Union County (e.g., Summit, NJ), Essex County, Passaic County, Bergen County, or Hudson County, seek local legal counsel (an attorney or lawyer) to be certain you are aware of local data retention rules and laws.

The author is not responsible for any errors of the IRS or State of New Jersey in their respective publications. The IRS and the State of New Jersey may update their publications periodically. Be certain to refer to the most recently published information. The author has no business interest in Mozy or Carbonite or any other product or service vendor mentioned by name, and does not endorse or recommend such product or service over competing services.

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Working Cooperatively With Home Improvement Contractors

Thursday 2 September 2010 - Filed under Uncategorized

New Jersey has adopted a powerful set of legal protections for consumers, commonly known as the Consumer Fraud Act.

The Consumer Fraud Act is meant to protect the consuming public – and sometimes businesses as well – from the acts and omissions of businesses engaged in the selling of a wide range of products and services.

Home improvement work is a consumer service especially likely to cause disputes between consumers and the businesses who perform the work. In most cases, the dispute revolves around a misunderstanding or miscommunication that could have been avoided.

That is exactly why the legislature and the Office of the Attorney General require home improvement contractors to offer the consumer a formal written contract for work in excess of $500.

The Consumer Fraud Act regulations also require written contracts that display the contractor’s legal name, business address, and other sensible precautions, including a 3-day right to cancel the contract.

Some may call these requirements mere formalities or onerous meddling in private business transactions; however, if you were to spend any time in a courthouse, you would see how often failure to follow these common-sense precautions leads to disagreements ending in a costly lawsuit.

Where a home improvement contractor has behaved in a particularly irresponsible or fraudulent manner that has directly caused harm, the consumer may be entitled to “treble damages,” that is, three times the value of harm the contractor caused.

Even where a home improvement contractor has not acted in a particularly harmful manner, the contractor may still be liable for omissions, things it did not do that it knew it should have done.

Consumers and home improvement contractors alike are therefore well-advised to familiarize themselves with the provisions of the Consumer Fraud Act and to abide by the act and associated regulations.

Even where there is no substantive basis for a consumer claiming “treble damages” against a home improvement contractor, the contractor may have committed technical violations of the act. Referring to these violations may help both sides reach an amicable settlement of the dispute.

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Are your important legal documents up-to-date?

Thursday 22 April 2010 - Filed under Elder Law + Estate Planning

Older legal documents such as wills, powers-of-attorney, and health care directives (sometimes known as living wills) deserve periodic review and updating. Even though the law changes relatively slowly compared to computer technology and the latest entertainment news, the law does change. You need to check whether you are keeping up with the changes, particularly if your documents are more than ten years old.

For example, the federal government enacted “new” law in 1996 for the purpose of protecting your personal health information. In most situations, doctors and hospitals now need to be much more careful about obtaining your written consent before disclosing information about you, your health, or your medical treatment to others. The disclosure restrictions probably won’t be an issue in an emergency. However, it only makes sense to have up-to-date documents that make it crystal clear to the keeper of your medical records that he or she will not be faulted for disclosing your data when you want them to. Up-to-date documents will give the people interpreting them maximum confidence to act on your behalf — without delay.

The Banking Power-of-Attorney (POA) Act, a law the New Jersey legislature passed in 1991, is another example of a relatively “new” law that may have made documents you signed in the 1980s obsolete quite a while ago. The Banking POA Act establishes a comprehensive range of banking powers. Banks will look for some reference to it in your papers, but older powers-of-attorney probably won’t even mention it. Moreover, if your power-of-attorney is more than 10 years old, you should replace it merely due to its age, especially if your designated agent is not your spouse, your parent, or a descendant of your parent.

In addition, if you have changed banks since you last signed your power-of-attorney, you should consider executing a new one. Look for a lawyer who will involve your bank in the process. Bank legal departments have widely varying procedures and requirements. It is best to have your lawyer confer with your bank so as to maximize the probability the bank will honor the document when it is needed.

Making sure your documents are up-to-date does several good things. First, when your documents make a good impression, you and your documents are more likely to be taken seriously. Second, when the chips are down, you don’t want the people interpreting your documents wondering whether they are still legally valid. So even if you think your personal circumstances have not changed since you last spoke to a lawyer, sometimes the law has. Up-to-date documents will give the people you are depending on to carry out your wishes the confidence they need to proceed on your behalf, just when you need it the most.

The information provided on this site is not meant to be legal advice for your particular situation but merely conveys general information related to legal issues commonly encountered.

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31-8-7213 Holmes v. Kimco Realty Corporation, Third Cir. (Hardiman, U.S.C.J.).

Friday 16 April 2010 - Filed under Landlord / Tenant - Common areas liability + Negligence - Duty

“[T]he question of a tenant’s common law duty to maintain a multi-tenant parking lot has not been addressed by the New Jersey Supreme Court . . . .”

In the absence of a controlling New Jersey Supreme Court opinion, the U.S. Court of Appeals for the Third Circuit recently predicted that New Jersey would not impose a duty on an individual commercial tenant for a dangerous condition in a common area, at least not where the commercial landlord had agreed to exercise maintenance responsibilities.  Whether you agree or disagree with the Third Circuit’s analysis, it seems that applying the law in this area will remain heavily dependent on the facts of a given landlord / tenant situation.  Expect future litigation to depend heavily on the unique facts of each situation.

The Holmes facts:

The plaintiff in Holmes was injured when he slipped and fell on ice in a chain store parking area, part of a large parking lot shared by the chain store and two other large, standalone chain stores.  Although the area where the injury happened was close enough to the defendant store to be dotted with cart corrals and signs belonging to defendant, the parking spaces were not dedicated for exclusive use by the customers of that store only.  Moreover, all three stores had their signs posted at the entrance to the parking lot.  Customers could park anywhere and follow their own walking path to whichever store they chose.  Defendant’s lease also explicitly provided that all tenants in the shopping center and their “invitees” (i.e., store customers) enjoyed a shared “non-exclusive right to use the parking lot and other common areas” and that the landlord would maintain and carry liability insurance for the parking lot.

Issue:

Will New Jersey courts hold a commercial tenant defendant liable for a dangerous condition in a parking lot it shares with other commercial tenants, where the defendant’s lease explicitly provides that the landlord will maintain and carry liability insurance for that common area?

Holding:

After reviewing available case law, the Third Circuit Court of Appeals predicted that the New Jersey Supreme Curt would find that “[a] lessee in a multi-tenant shopping center does not have a duty to maintain common areas controlled by the landlord.”

Rationale:

The Court reasoned that although the three chain stores were widely spaced and the particular area of the parking lot where plaintiff fell was marked with defendant’s own signs and cart corrals, the lot otherwise “looked like a multi-tenant facility.”  The Court noted that lower courts “have refused to impose a duty on tenants for common areas of a multi-tenant facility.”

The Court explored, mostly in footnotes, issues of control and contractual maintenance duties at some length without establishing a bright line for future analysis.  In this case, the Court seems to have based its decision on three key factors: 1) Customers could have walked any number of paths to and from the store; 2) It would be unfair as well as impractical to hold one tenant or another responsible for an entire, shared parking lot; 3) There was no question that the landlord had agreed to maintain the lot in the lease.

Dissent:

The dissenting opinion focused on the customers’ expectation of safe passage to and from the store and engaged in its own factual analysis.  The dissent noted that there were only three stores, spaced far apart, and the defendant store was in “exclusive possession” of its portion of the shared parking lot.  Defendant’s own signs and cart corrals, for example, demonstrate that the tenants controlled their own areas of the lot.  These installations suggested to customers that defendant was a separate entity with its own responsibilities over its own area of the lot, such that customers would expect the store to provide “safe passage” to and from the store.

The dissent also argued that the majority failed to consider sufficiently that the tenant might pursue indemnification from the landlord.

Conclusion:

Future cases will depend heavily on a court’s interpretation of available facts.

The opinion may be found here: http://www.ca3.uscourts.gov/opinarch/084834p.pdf

Comments Off on 31-8-7213 Holmes v. Kimco Realty Corporation, Third Cir. (Hardiman, U.S.C.J.).  ::  Share or discuss  ::  2010-04-16  ::  admin