Daily Development for Tuesday, September 28, 2004
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu

LEASES; EVICTION; RETALIATION: New Jersey refuses to embrace the notion that a commercial tenant may establish that the landlord’s failure to renew a lease constitutes a “retaliatory eviction.” Although acknowledging that some future case might find the defense apt as an equitable obstacle to eviction, the court concludes that the claim is not available where the landlord allegedly retaliated against a tenant who filed a personal injury action against the landlord.

1266 Apartment Corp. v. New Horizon Deli, Inc., 368 N.J. Super. 456, 847 A.2d 9 (App. Div. 2004)

After the expiration of a four-year lease, a commercial tenant became a month-to-month tenant. A few years later, the owner of the commercial tenant fell in front of the premises, allegedly because of accumulated snow which had been inadequately cleared and had turned to ice. At about this time, unsuccessful negotiations were taking place between the tenant and the landlord about a possible three-year lease. The tenant's owner then filed a personal injury complaint seeking compensation for his fall. Shortly thereafter, the landlord served the tenant with a Notice to Quit and Demand for Possession. The tenant's owner then offered to consider discontinuing his personal injury claim if acceptable lease terms could be negotiated. As a result, the landlord did not press its request, and negotiations continued during which the landlord said it would not enter into a lease if the personal injury action was pending. Negotiations once again failed, leading the landlord to enter into a five-year lease with another tenant. The landlord then served the current tenant with a second Notice to Quit and Demand for Possession. When the tenant failed to vacate, the landlord brought suit for eviction.

The tenant initially argued that the landlord breached an implied covenant of good faith and fair dealing and that the tenant was subjected to economic duress. The court acknowledged that a breach of an implied covenant may give rise to a cause of action for damages for a breach of contract, but pointed out that the covenant would not be applicable here unless the landlord’s conduct in fact constituted unlawful retaliation. So there was no independent grounds for breach of the implied covenant of good faith and fair dealing.
As to the economic duress claim, the court concluded that the doctrine is properly invoked not to compel entry into or maintenance of a contract, but rather to invalidate an otherwise enforceable contract. Again, no claim here.

Turning to the separate claim of retaliatory eviction, the court noted that most courts, and the Restatement of Property, have not embraced the notion that retaliatory eviction is available to commercial tenants (the Restatement expressly takes no position). But it cited the supplement to Powell on Real Property and three cases, from Washington, Hawaii and California, that arguably support that application.

In the end, the court concluded that commercial retaliatory eviction might be a viable defense in New Jersey at some future time, as part of the general notion of equitable defenses to eviction, but concluded that this was not the appropriate case in which to introduce the doctrine into New Jersey jurisprudence. It noted that the scant precedent applied the concept only in cases implicating a strong public interest, and the simple dispute over the filing of a slip and fall personal injury case did not rise to that stature.

Comment 1: One of the three cases cited by the court in fact does not support the concept commercial retaliatory eviction by private landlords. In Port of Longview v. International Raw Materials, Ltd., 979 P.2d 917 (Wash. App. 1999), the DIRT DD for 1/26/00, the court held that a tenant could argue that the termination of its lease constituted a denial of free speech because it was in retaliation for its complaints concerning the safety of certain practices carried on by the landlord, a publicly owned and operated port. The New Jersey court’s citation this case in support of the notion that retaliatory eviction might sometimes be available is not really appropriate, as the Port was a public entity and the case involved constitutional free speech implications that ordinarily are not present when there is no government action involved.

A stronger case for the proposition is Windward Partners v. Santos, 59 Haw. 104, 577 P.2d 326 (1978), agricultural tenants who opposed redesignation of land from “agricultural” to “urban” and testified against landlord’s petition at State Land Use Commission’s public hearing, were permitted to assert retaliatory eviction as an affirmative defense in subsequent summary possession proceedings in which landlord sought to dispossess tenants. Four of these tenants were residential and four were commercial/agricultural. This case does stand for the proposition that retaliatory eviction claims are available for commercial tenants where the alleged retaliation is against their carrying out activities of important public moment, such as participating in land use hearings, but the case stands alone after almost thirty years, and arose during the heat of the “implied warranty of habitability” debate in which courts nationwide were permitting residential tenants extraordinary new rights in the interest of pressing landlords to provide decent, safe and sanitary housing.

The only other case cited by the court in support of the notion of commercial retaliatory eviction was Custom Parking Inc. v. Super Ct., 138 Cal. App. 3d 90, 187 Cal. Rptr. 674 (1982) (defense successful where there is a strong public policy against intimidating witnesses in a lawsuit from testifying truthfully). Again, more than twenty years later, no other court has seen fit to follow the case and many have distinguished it, perhaps limiting it to its facts.

Comment 2: The New Jersey court’s position here, basically, is “never say never.” Where a landlord refuses to extend or renew a lease for motives that a court views as outrageous, there may be some basis for court refusal to provide an immediate eviction. This view is similar to that expressed by Espenscheid v. Mallick, 633 A. 2d 388 (D.C. 1993), which stated:

“We conclude, without foreclosing the possibility that at some point the court may be presented with a case in which it would conclude that public policy, as amply set forth in the record on appeals, calls for extensions of the retaliatory eviction defense to commercial tenants in mixed-use buildings, appellant has failed to present a record that would indicate that this is such a case.” (Case involved a claim of retaliation for complaining about the landlord’s failure to maintain premises in good repair.)

But this is a far cry from a court ordering the landlord to renew or extend a lease with a tenant that the landlord doesn’t want. It is hard to imagine a modern court imposing a new tenancy on the landlord in such a case for very long, regardless of what other remedies the court might devise.

Comment 3: The editor has discussed this topic extensively in his revision of the Friedman on Leases Treatise (Randolph Edition, PLI 2004), Section 14.6.1.

Readers are encouraged to respond to or criticize this posting.

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