Excuses Not Reasons
by Ron Davis
Excuses cannot prevent a New Jersey retail tenant from losing the business that has operated at the same location for the past 25 years.
The tenant is a Kings supermarket, located in West Caldwell and whose parent company is a chain of some 20 stores in the New Jersey-New York area. At that West Caldwell store, Kings subleases space from Stop & Shop Supermarket Co., which in turn leases from the owner of the property.
Kings and Stop & Shop signed the first sublease in 1981. The terms of that sublease allowed for extensions. But when the most recent renewal required Kings to provide written notice of its intentions by August 31, 2004, Kings did not respond until May 26, 2005, nine months past the deadline.
The Kings sublease states, in part, “If tenant shall not notify landlord [by the extension due date] of its intentions, then this lease shall expire as of the expiration of the then current term or then current extension period and shall not be extended.”
On May 31, 2005, Stop & Shop notified Kings that it must vacate the West Caldwell store by May 31, 2006. Kings sued, arguing that it had invested some $6 million in renovations to the West Caldwell store and that it had been an “important fixture” in the community for the past 25 years. Kings also maintained that Stop & Shop knew prior to August 2005 that Kings wanted to extend its sublease and did nothing to ensure compliance with the notice provisions.
In response, Stop & Shop simply pointed out that it made no definite commitment to renew the Kings sublease.
A New Jersey court agreed with Stop & Shop, explaining, “With respect to Kings’ argument that it has invested some $6 million in renovations of the West Caldwell store, it appears that this fact alone does not make it inequitable to enforce the terms they agreed to. While it does give some indication that Kings had longstanding intentions for that location, it doesn’t provide them with an excuse to ignore the terms of a contract it bargained for.... Because Kings missed its deadline as set forth in the terms of the contract and because there are not special circumstances to remove it of its obligation under that contract and because Kings effectively slept on its rights, we rule in favor of Stop & Shop.”
On appeal, a New Jersey appellate court affirmed the lower-court decision. (Kings Super Markets, Inc. v. Stop & Shop Supermarket Co., 2006 WL 1449339 [N.J.Super.A.D.])
Decision: May 2006
Published: June 2006