On appeal from Superior Court of New Jersey, Law Division, Hudson County, No. L-3137-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Grall and Messano.
Following a bench trial, the trial court entered judgment in favor of plaintiff Finesse Enterprises, Inc. ("Finesse"). Defendants Angel Leyva and his wife Edith ("Leyva") have appealed. After reviewing the record in light of the contentions advanced on appeal, we reverse.
Levya owns the building located at 3908 Kennedy Boulevard in Union City. It is a two-story structure; on the ground floor there are two shops, the larger one containing a dry cleaning business, the smaller a hair salon. The second floor contains a large room that is rented out for parties. For many years Leyva owned and operated the dry-cleaning business in the building. On May 31, 2002, Finesse, through its principal Fred Simancas, executed a written lease, renting that store-front portion of the building from Leyva for a five-year period for a monthly rent of $1,300 for use as a dry-cleaning business.
The lease specified that "commencing on the second year and every year thereafter a rent increase of $100.00 per month will be added to the base rent." It also specified that if the real estate taxes on the building increased during the lease term, the tenant would pay "32.5% of the amount by which [the] tax exceeds the annual tax for the base year, inclusive of any increase during any such calendar year." One other paragraph of this 2002 lease is pertinent to the issues on appeal.
If any portion of the premises of which the leased premises are a part shall be taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to purchase and or shall sell and convey the said premises or any portion thereof, to the governmental or other public authority, agency, body or public utility seeking to take said land and premises or any portion thereof, then this Lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as the Landlord shall fix by notice in writing.
The Tenant shall have no claim or right to claim or be entitled to any portion of any amount which may be awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings. All rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the said lands and premises of any portion thereof. The Tenant agrees to vacate the said premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord. The Tenant shall repay the Landlord for such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.
In 2004, some three years before the original lease expired, the parties executed a new lease, which was prepared by Simancas and, he testified, with the assistance of several friends of his from college.
This 2004 document contained terms at significant variance from the original lease. The original lease was silent as to renewal. This second document granted Finesse the right to renew the lease for three separate terms of five years, conditioned upon Finesse "giving written notice to [Leyva] not less than ninety (90) days prior to the expiration of the Initial Term," defined as the period June 1, 2002, and ending May 31, 2007.
Although the second lease set the rent for the first year at $1300 per month and provided for a rent increase of $100 per month in the second, and each succeeding year of the lease term, it also provided that if Finesse exercised its right to renew the lease term, the rent would be "based on the prior term's base rent." Simancas said in a certification that the rent reverted in this manner under the 2004 document "based on the assumption of [the parties] that the market value for real estate in the area would decrease during the rental term."
This second lease, moreover, contained no provision obligating Finesse to absorb its proportionate share of any increase in real estate taxes no matter how long it decided to remain in the premises. It did, however, include the basement as part of the leased space while the earlier document contained no mention of the basement. In addition, this second lease gave Finesse a twenty-year option to purchase the building for $500,000 but was silent as to when and how this option could be exercised. It contained the following provision to deal with the possibility of the municipality taking the premises through eminent domain:
If any legally constituted authority condemns the Building or such part thereof which shall make the Leased Premises unsuitable for leasing, this Lease shall cease when the public authority takes possession, and Landlord and Tenant shall account for rental as of that date. Such termination shall be without prejudice to the rights of either party to recover compensation from the condemning authority for any loss or damage caused by the ...