Applying residential principles for legal remedies in the commercial context

 

An implied warranty of habitability is a warranty implied by law in all residential leases that the premises are fit and habitable, and that the premises will remain fit and habitable throughout the duration of the lease. Accordingly, even in the absence of expressed lease provisions, common law principles provide that a residential landlord must meet this minimal standard. If the residential landlord fails to meet its burden, the tenant may exercise remedies available to it, including, but not limited to, making repairs and deducting rental payments, or withholding the rent entirely. In New Jersey, if a residential landlord pursues a judgment for possession of the premises, and a residential tenant believes that the premises’ vital facilities have been disrupted, a residential tenant may request a Marini hearing (pursuant to Marini v. Ireland, 56 N.J. 130 (1970)). During a Marini hearing, the court will determine whether a residential tenant properly withheld the rent, and if the court holds that the residential tenant acted reasonably, the Court will award an adequate rent abatement.  Under the most extreme circumstances, a residential tenant may assert that it has been constructively evicted. In other words, a residential tenant may argue that the residential landlord’s breach of implied and/or expressed covenants are substantial enough to permit the tenant to terminate the lease and abandon the premises, without further duty to the residential landlord, including the obligation to pay rent. 
Although a commercial tenant is generally not afforded the same rights as a residential tenant, a commercial tenant is not without protection. For example, in Reste Realty Corp. v. Cooper, 53 N.J. 444 (1969), a commercial tenant utilized offices for meetings and training of sales personnel in connection with the business of a jewelry firm. The Court ultimately held that the commercial landlord’s failure to address flooding issues resulted in a material failure of consideration, and such failures resulted in a substantial interference with the beneficial enjoyment of the premises. The Court held that the commercial tenant was entitled to exercise the remedy of constructive eviction, while suggesting the presence of an implied warranty in a commercial lease against latent defects. The Court also evoked standard contract principles, indicating that as a result of the commercial landlord’s material breach of the lease, the commercial tenant was relieved of its obligations under the lease. In furtherance of that view, the Court in Westrich v. McBride, 204 N.J. Super. 550 (1984) applied the Marini doctrine, and the right to a rent abatement in the commercial setting where the commercial landlord failed to provide adequate heat. The Westrich Court further articulated standard contract principles, characterizing the lease as a set of mutually dependent covenants, i.e., the commercial tenant’s covenant to pay rent is dependent upon the commercial landlord’s covenant to permit quiet enjoyment of the premises. The Westrich Court concluded that whether the Marini doctrine should apply in the commercial setting requires consideration of the relative bargaining positions of the parties, the type of use of the premises, and the equities involved in the breach of the lease.
Accordingly, whether a court is likely to apply residential principles in the commercial setting is generally fact intensive, and is dependent upon equitable principles, including, but not limited to, the sophistication of each party, and the nature of the breach. However, prior to the commencement of any tenancy, it is in the best interests of the parties to enter into a clear and unambiguous lease setting forth the rights and obligations of each party.
Brian Rader, a partner at Jardim, Meisner & Susser, PC, has counseled individuals and businesses providing a full range of legal advice and services. As a former judicial clerk in the Civil Division of the New Jersey Superior Court, Rader is well-versed in all phases of the civil litigation process.

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