DANIEL SHAFFER v. TINY BLESSINGS II, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1698-04T51698-04T5

DANIEL SHAFFER,

Plaintiff-Appellant,

v.

TINY BLESSINGS II, MYRIAM &

ELIAS SANTIAGO,

Defendants-Respondents.

_______________________________

 

Argued November 2, 2005 - Decided

Before Judges Wefing and Fuentes

On appeal from Superior Court of

New Jersey, Law Division, Special

Civil Part, Essex County, Docket No.

LT-31939-04.

Randy T. Pearce argued the cause for

appellant (Pearce Fleisig, attorneys;

Mr. Pearce, on the brief).

Paul Sant'Ambrogio argued the cause for

respondents.

PER CURIAM

This is an appeal from a landlord-tenant case, in which the Law Division, Special Civil Part, dismissed plaintiff's complaint seeking a judgment of possession against defendant for non-payment of rent. The complaint alleges a violation of a commercial lease entered into by plaintiff, Daniel Shaffer, and defendant, Tiny Blessings II, a child daycare center operated by Myriam and Elias Santiago.

We make one brief comment as to the procedural history of this controversy. It is not uncommon for landlord-tenant cases to have complicated procedural histories. This case is no exception. As best as we can determine, plaintiff has filed three complaints seeking possession of these premises. The first complaint, alleging non-payment of rent and late fees, was filed in July of 2004. The court dismissed this action based on a defect in the form of notice sent to defendant. Plaintiff appealed that judgment. (A-4442-04T5).

After allegedly correcting this problem, plaintiff filed a second complaint in September 2004, again based on non-payment of rent and late fees. This appeal is taken from the dismissal of this second complaint. (A-1698-04T5). The third complaint was filed while this second appeal was pending. It appears that plaintiff was unsuccessful in this latest case, because the Office of the Appellate Clerk reports that an appeal from that decision was filed on August 11, 2005. Despite these procedural hurdles, we are satisfied that the record before us is sufficiently complete to address the issues raised.

Plaintiff framed his cause of action before the trial court as a summary dispossess proceeding for non-payment of rent. The amount of rent allegedly due and owing was derived from past due rent, penalties for late payment of rent, and fees associated with utility services, which the lease agreement characterizes as additional rent. Prior to the commencement of the trial, defendant stipulated that these types of charges were in fact considered additional rent under the lease. Despite both the provisions in the lease document, and defendant's stipulation, the trial court concluded that these charges were not "additional rent," and dismissed the complaint for lack of subject matter jurisdiction.

Based on the record before us, we are satisfied that the trial court erred in this respect. Even without defendant's stipulation, the lease agreement specifically defines the charges at issue here as "additional rent."

All rental payments and other charges provided for herein [including utilities and late payment of rent penalties] shall be paid without set off, recoupment, counterclaim or abatement of any nature whatsoever. Rental and other payments shall be made without previous notice or demand therefor[e] and shall for purposes of Landlord's rights, including the nonpayment thereof, and for all other purposes for which the same shall be relevant be deemed additional rent subject to the same duties and obligations of Tenant with respect thereto and the same remedies of Landlord for the nonpayment of basic rent.

(Emphasis added.)

As best we can discern, the trial court also held that even if late payment of rent penalties were deemed "additional rent," plaintiff had (1) waived his right to collect them; and (2) the late fee provisions in this commercial lease agreement were unconscionable and unenforceable. We will address each one of these issues separately.

FEE FOR LATE PAYMENT OF RENT

The lease agreement provides that:

The tenant must pay a late charge of 10% of the monthly rent for each payment that is more than (5) days late. In addition, in the event that any monthly payment remains unpaid (including late fees) from the previous month, then an additional ten percent (10%) late fee shall be assessed on the 5th day of the following month. By way of example, if the April 2002 rent payment is not paid by April 6, 2002, then the amount due will be increased to $1,760.00 ($1,600 rent plus (10%) late fee of $160.00). If the entire $1,760.00 is not paid by May 6, 2002, then the amount due will be increased to $1,920.00, ($1,760.00 plus (10%) late fee of $160.00) etc. until paid in full. This late charge is due with the monthly rent payment.

In its analysis, the trial court characterized these provisions as "onerous," and noted, without specific reference to any authority, that "it is the policy of this State . . . that [these] sort of administrative fees need to be in some manner rationally related to the [landlord's] administrative costs." To the extent that this conclusion facially invalidates the late fee provisions in the lease, we disagree.

Unlike residential tenancies, the terms of commercial leases are almost exclusively derived by market forces. That is, other than complying with local zoning and construction codes, and abiding by whatever regulatory scheme may be applicable to the business conducted in the demised premises, a commercial landlord is free to negotiate with the tenant the terms of a lease, including "additional rent fees" for late payment of rent.

This does not mean, of course, that there need not be a nexus between the amount of the fee charged, and any additional reasonable administrative cost incurred by the landlord. A late fee provision in a commercial lease is, at its essence, a stipulated damages clause. Whether such clause is intended to be an unenforceable penalty, or an enforceable liquidated damages provision, requires the application of the following test:

Liquidated Damages and Penalties

(1) Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.

Restatement (Second) of Contracts 356 (1981).

We are satisfied that the record before us does not permit a fair resolution of this issue. The evidence is clear, indeed uncontroverted, that defendant was habitually late with its monthly rental obligation. In fact, defendant did not pay any rent at all from May to July 2002. Commencing in September 2002 through March 2003, defendant paid an additional $400 in rent in an attempt to payoff the arrears. There is no evidence, however, that defendant paid late fees.

We are thus compelled to remand this matter for the trial court to determine the reasonableness of the late fee schedule, as compared to the factors outlined in the Restatement. If the court finds the provision compounding the late fees to be unreasonable, it should endeavor, to the extent possible, to reform the contract to fulfill the parties' original intent that: (1) rent be paid in full and on time; and (2) the landlord be reasonably compensated for late rental payments. St. Pius X House of Retreats v. Diocese of Camden, 88 N.J. 571, 577 (1982).

WAIVER

The court found that plaintiff had waived his contractual right to seek a late fee because of his repeated acceptance of late payments. Standing alone, these facts are insufficient to sustain a finding of waiver. A waiver involves "the voluntary relinquishment of a known right evidenced by a clear, unequivocal and decisive act from which an intention to relinquish the right can be based." Country Chevrolet, Inc. v. North Brunswick Planning Bd., 190 N.J. Super. 376, 380 (App. Div. 1983).

Plaintiff's actions here, with respect to the acceptance of late rental payments, do not manifest the intent necessary for a finding of waiver. Indeed, plaintiff made several attempts to evict defendant based on late payment of rent and kept a detailed ledger documenting the accumulation of late fees from month to month. In short, the evidence does not support the court's legal conclusion.

We are thus compelled to reverse the order of the trial court and remand the matter for the entry of a judgment of possession. Although the record is clear that defendant has not met its financial obligations to plaintiff under the lease, we are unable to discern the exact amount of rental arrears. On remand, the trial court is directed to conduct an evidential hearing to determine the exact amount of rental arrears.

The judgment of the trial court dismissing the complaint for lack of subject matter jurisdiction is reversed. The matter is remanded for further hearings consistent with this opinion.

Reversed and remanded.

 

The complaint alleged that defendant owed $52,636.45 "for the months of May 2002 - September 2004 for past due rent, late charges, electric and water bills."

Despite plaintiff's testimony and evidence presented to the trial court, the late fee provision does not, on its face, appear to authorize the compounding of the late fees.

(continued)

(continued)

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A-1698-04T5

December 8, 2005