On appeal from Superior Court of New Jersey, Special Civil Part, Essex County, Docket No. LT-14295-00.
Before Judges Pressler, Ciancia and Coleman.
The opinion of the court was delivered by: Coleman, J.S.C. (temporarily assigned)
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically February 25, 2002
The dispute in this matter arises out of a lease agreement between defendant Chris Simeonidis, the tenant, and plaintiffs Richard and Janet Oscar (hereinafter referred to as Oscar), the landlord. The trial court held a purported amendment to the lease agreement unenforceable for lack of consideration and thereafter determined fair market rental value as the basis for renewal of the lease under an option exercisable by the tenant. The tenant appeals. Because we disagree with the trial court's holding that the amendment was unenforceable, we reverse the order of the trial court and remand the matter for a determination of the rental pursuant to the formula contemplated by the amendment. We affirm that portion of the trial court's order that determined the tenant shall be responsible for payment of real estate taxes in addition to the rental payable upon renewal.
The parties' relationship began in early 1991 when defendant Simeonidis purchased from Nick Barrise a restaurant business located in a two-story building owned by plaintiff in Montclair. As part of that purchase transaction defendant took over the lease agreement Barrise had with plaintiff. The lease agreement was for a ten-year term, beginning January 1, 1990 and ending December 31, 1999. The agreement specified "first year rent $2,500 per month to be increased annually at the rate of C.P.I. (consumer price index) with a minimum annual increase of 5%." Paragraph 32 of the lease agreement also provides: "Tenant to pay real estate taxes and any increases therein on a monthly basis, payable to the landlord, and included with the rental payment." Additionally, Paragraph 31 of the lease agreement contains a renewal option which states:
At the termination of the within lease, the tenant is given the first option to enter into a new rental agreement with the landlord. This option will be for two consecutive five year terms with an increase based on fair market rent.
Although the lease agreement recites in Paragraph 29 that it is the full agreement of the parties that "may not be changed except in writing signed by the landlord and the tenant," from the outset the parties deviated from the terms of the agreement. *fn1 Simeonidis purchased the business from Barrise and assumed the lease in the second year of the term. Oscar charged Simeonidis $2500 inclusive of real estate taxes. According to Oscar, he did this to help Simeonidis develop his business. He also claims he did it as a favor to his friend Barrise. Simeonidis contends Oscar did not increase the rent or make him pay taxes as specified in the lease because the commercial rental market in Montclair was severely depressed. In any event, over the years the rent paid by Simeonidis and accepted by Oscar was below that set forth in the lease agreement. During the final two years of the lease agreement, Oscar increased the rent to $3,150 a month, inclusive of taxes. Simeonidis paid that amount without challenge.
As the ten-year term was about to expire, Oscar sent a renewal letter to Simeonidis offering to continue the lease at a new rent of $5,000, inclusive of real estate taxes. When Simeonidis did not respond to that letter, Oscar sent a time-of- the-essence letter, requesting that Simeonidis either consent to the renewal of the lease at the new rate or surrender the premises. Simeonidis still did not respond. Oscar then filed a complaint seeking possession of the premises and the matter proceeded to trial before the court in a summary action.
The proofs at trial consisted of testimony on the issue of the fair market rental value of the premises. Plaintiff presented an expert, Richard Polton, who gave a detailed market analysis, including historical trends and a comparison of similar rental properties in the area. Polton concluded that the fair market value of the premises was $22 a square foot, or a monthly rent of $5500 given the size of the premises (3000 square feet). *fn2 He further testified that this amount did not include real estate taxes, which were separately payable by the tenant.
Simeonidis challenged Polton's valuation of the property. He testified that he was responsible for heat, hot water and electricity and that these expenses, averaging around $2000 a month, were beyond what normally would be charged a tenant. Simeonidis further testified he was responsible for all interior repairs to the property and that he had made substantial improvements to the premises. He did not present any expert testimony on fair market value.
At the close of the proofs, it was contemplated that the parties would submit written summations; however prior to the date for such submissions, defendant Simeonidis filed a motion for leave to present additional testimony based upon newly discovered evidence. He had learned of the existence of a document purporting to be an amendment to the lease agreement. The document had been discovered in the files of a third party, J. Roc Associates, which held a note from defendant Simeonidis in connection with his purchase of the restaurant. Pursuant to Paragraph 33 of the lease agreement, "if tenant defaults...Jay Roc Associates has the right to assume all rights and obligations of said lease." The trial court granted defendant's motion to reopen the proofs to permit evidence concerning the purported amendment.
When the proceedings resumed, John Meely, a partner at J. Rock, testified that he had found the document in his file relating to outstanding notes with defendant. Meely testified that his partner, Rocco Caruso, who had passed away several months prior to the trial, had handled the file and that he believed their attorney also had a copy of the document. The document is in letter format, dated March 28, 1991. It contains the signatures of Nick Barrise and Richard Oscar. It reads:
The following is an amendment to the above- mentioned lease [lease dated January 3, 1990 between Richard and Janet Oscar and Nick Barrise on the property located at 12 Church Street, Montclair, N.J. 07042]: As of this date, the clause in paragraph 31, pertaining to an extension of this lease, which reads "Increases based upon fair ...