In last month’s blog, our office presented Part One of our discussion on our recommendations to an arbitration board with regard a commercial landlord tenant matter, in which the tenant withheld rent in due to alleged habitability defects. In this month’s blog, we continue our discussion of our analysis of that matter.
In most cases, the Court is loath to construe the Tenant’s good faith actions to enforce a contract as a default of the contract. Like most default provisions found in commercial leases, the default in the lease in this matter was not curable. Therefore, in the event that the Tribunal were to declare a default in this matter, it is clear that the Tenant would not only forfeit the tenancy, but would also forfeit the benefit from the substantial investment he made in preparing the premises for the current use. Under the matter of Mandia v. Applegate, 310 N.J. Super 435, 447 (App. Div. 1998), “[l]anguage which may defeat an estate must be strictly construed and always against… a forfeiture.” In the matter of Vineland Shopping Center, Inc. v. DeMarco, 35 N.J. 459, 465 (1961), the Court held that “[i]n a proper case, equity will relieve a Tenant from forfeiture of a lease by reason of non-payment of money where performance has been made.
In the pendent matter, the Tenant defaulted in the lease by failing to pay rent. While the Tenant probably had other mechanisms of compelling the Landlord to make the requested repairs, the Tenant in this matter did not have a lot of good alternatives. Notwithstanding the clear statement contained in the written lease, we were required to determine whether it would be equitable for us to terminate the tenancy of someone who was only trying to compel the Landlord to make repairs that the Landlord was responsible to make. In the matter of Urdang v. Muse, 114 N.J. Super 372 (Cty. Dist. Ct. 1971), the Court held that “the Court may under its equitable powers, as enunciated in Vineland Shopping Center, relieve against forfeiture. This it may do despite the fact that defaults have taken place … The essence of the power to relieve against forfeiture is that equity may intervene to mitigate the inequitable consequences of a breach.”
With regard to the withholding of rent, the main questions presented by the Tribunal were: (a) Is the Landlord correct that regardless of the merit of the Tenant’s claims, since the Lease clearly states that if the Tenant withholds rent, he is in default, is the Landlord correct in his assertion that the failure to pay rent in this instance shall constitute a default; and (b) even if the Tenant is not in default, if it is found that the Tenant withheld more than was needed to fix the problem, would that be grounds for default?
With regard to the first question, we noted the Landlord’s argument that in order to properly justify the withholding or rent, the Tenant must deposit that rent with the Court. In fact, the procedure of a Tenant depositing money with the Court is used in Marini cases, in order to protect the rights of the Landlord in the event that the Tenant does not prevail. However, under the procedure set forth in Berzito, the Tenant is not required to post the money with the Court until the Landlord commences action. In fact, the Special Civil Part of the Superior Court, which presides over Landlord Tenant proceedings, has no mechanism in place by which a Tenant could post money with the Court unless an eviction action is first filed. The procedure described in Berzito has come to be referred to as a Marini Hearing, although that name is a misnomer, since Marini v. Ireland, 56 N.J. 130 (1970) did not describe the posting of rent, but rather the deducting of rent for repairs that the Tenant already made.
The second question was moot, insofar as the procedure of withholding rent and posting it with the Court, as set forth in Berzito, almost always involves an amount that is far in excess of the amount that it would cost to repair the habitability issue that necessitated the withholding of rent. In the event of a habitability hearing, the Tenant must post all of the withheld rent with the Court, and not just the portion of the rent that would have been attributable to the repairs that are sought. Therefore, making any factual determination about whether the amount withheld exceeds the amount that it would cost to remedy the problem, for purposes of determining whether a default occurred, would be tantamount to arguing that the entire process described in Berzito is invalid.
Finally, since Marini and Berzito are decisions specifically targeted toward residential matters, where the rights of the parties are more statutorily governed, rather than commercial matters, where the rights of the parties are more contractually governed, we must determine whether Marini and Berzito can be applied toward a residential tenancy. The Tenant in the pendent matter argued that these cases are applicable, under the holding in the matter of Westrich v. YD McBride, 204 N.J. Super (1984). In that matter, the Tenant was complaining about a lack of heat in the premises. The Appellate Division determined that, under the circumstances, it would be appropriate to apply Marini and Berzito to that matter. We did not see any substantive distinction between that matter and the pendant matter. We thus concluded that the Tenant’s decision to withhold rent in the pendant matter was proper.