The Law

No Fraud in Increased Common-Area Maintenance Charges by Ron Davis Did a tenant of a New Jersey shopping center get a fair shake when the state paid out a huge sum for a road project that severely impacted the tenant’s business? After all, the entire payment went to the center’s owners, and the tenant suffered a major business loss resulting from the state project. The shopping center, Rutgers Village in Parsippany, has leased space to the tenant since 2002 for the operation of a cycle shop. Shortly after the tenant began operations, however, the state of New Jersey condemned a portion of Rutgers Village to widen an adjacent major highway. That project resulted in the elimination of several parking spaces used by cycle shop customers. Plus, the project affected access to the area of the shopping center directly in front of the cycle shop. The state subsequently paid the center’s owners $654,773 in compensation. But the cycle shop tenant received nothing. So the cycle shop tenant sued the center’s owners, charging them with breach of lease. A New Jersey court eventually ordered the center’s owners to pay the tenant $15,000 and reduce the tenant’s rent by $2,000 per month. That reduction would continue until the completion of the widening project and restriping of the shopping center parking lot. The order also required, after restriping, a reduction of the tenant’s rent by $1,500 per month for the duration of the lease term and an additional renewal period. But problems continued despite the settlement. Some three years later, the center’s owners sued the tenant for unpaid rent and common-area maintenance charges. They also demanded that the tenant vacate the leased premises. In response, the tenant countersued, claiming that the center’s owners breached the earlier agreement by increasing common-area maintenance charges that no other tenants were required to pay. Plus, the tenant added, the owners were “unjustly enriched” by earlier transactions. At a second trial, a judge rejected the center owners’ demand for possession of the tenant’s premises, finding that they had breached the terms of the earlier ruling of the court. The judge consequently awarded the tenant a retroactive rent abatement, but determined that the tenant owed for unpaid common-area charges. Nevertheless, the judge reasoned that the evidence did not show any “substantial aggravating circumstances” attached to the breach. The tenant appealed, arguing that the center’s owners committed a fraudulent act by singling out the tenant for an increase of the common-area maintenance charges. A New Jersey appellate court rejected any charges of fraud, however. Explained the judge, “Here, given the findings that no aggravating circumstances existed in the breach of the settlement agreement and lease, we reject the tenant’s contention [of fraudulent activities]” (Mauldin Real Estate v. Cycle Craft, Inc., 2012 WL 28637 [N.J. Super.A.D.]) Decision: January 2012 Published: January 2012