I just read a July 7, 2011 New Jersey Superior Court, Appellate Division decision that puzzles me. Basically, it says that in a lease that required the tenant to operate its business in a “first class and reputable manner,” the landlord had the implied covenant to operate a “first-class” shopping center. Then, when the landlord didn’t do so, it breached the lease and the tenant could vacate its premises.
Fourteen years ago, I wrote an article titled: “What Is This Thing Called Quiet Enjoyment? (in the Context of Commercial Leases).” The article may be dated, but I think I have followed the thrust of the law since then and that is why I’m surprised at the result in this case. I’m not surprised that a trial court might find such an implied covenant to maintain commercial property, but I didn’t think that, even in New Jersey, an appellate court would agree.
It was an unpublished case, Wallington Plaza, LLC v. Taher, A-4122-09T1 (N.J. Super. App. Div. 2011) and can be found by using this link: Wallington/Taher Opinion.
Here’s what happened. There was a small commercial shopping center with fourteen retail stores. A jewelry store tenant leased a 1,400 square foot store for ten years. The lease’s use clause required it to operate a “quality jewelry” store. The term “quality jewelry” meant jewelry using real gold, silver, other precious metals, diamonds, and other precious stones. The lease required the tenant to operate six days a week in a “first class and reputable manner.” There was a liquidated damage charge for each day the store was not open for business.
As the ten year term progressed, the shopping center went to “heck in a handbasket.” The court described the shopping center as “deplorable.” Most of the other stores had closed. This meant that the shopping center had lost at least a drugstore, a video store, a dollar store, a grocery store, and a card store. The parking lot was uneven and unpaved. There was grass growing through the broken concrete. Many stores were marked as vacant. Basically, the lower court found that “no one would say” this was a “first[-]class strip mall.”
Then, the lower court went on to hold “[c]learly there’s an obligation on the part of landlord to help maintain a mall to keep customers there for [its] tenants.” The Appellate Division agreed that the landlord “had breached its implied covenant to maintain the shopping center in a good condition to assist its tenants in selling their wares and goods.”
I think that fact patterns like this are good to see if you’re going to have a vigorous discussion about whether there is, or should be, an “implied duty” that requires a landlord to maintain a shopping center in first class condition or even in good condition. What surprises me, however, is that I didn’t think that this discussion had reached the point where a court would actually find such an implied duty. I grant that this is an unpublished decision but, in today’s world, you can’t hide result-oriented decisions by keeping them unpublished.
Who thinks that there is such an implied duty? Who thinks that there ought to be such an implied duty? Share your thoughts with all of us by posting your comments to: www.retailrealestatelaw.com.