Statute of Limitations Barred Owner’s Back Rent Claim

Facts: An office building owner continued to accept rent from a tenant after its lease was over. The lease provided that the owner could sue the holdover tenant for liquidated damages if it failed to surrender the space when the term ended. Several months later, the owner sent a “Notice to Surrender and Pay Rent,” to the tenant, terminating the holdover tenancy and ordering it to move out. The owner also informed the tenant that he owed back rent, but didn’t provide a breakdown of the alleged charges.

            The owner sold the property and sued the tenant for back rent. The tenant argued that the six-year statute of limitations—that is, the maximum time within which a plaintiff can sue a defendant—that was applicable to this case had expired, barring the owner’s claim. The owner asserted that because the lease was “sealed” a 16-year statute of limitations period applied. A trial court ruled in favor of the tenant, and the owner appealed.

Decision: The appeals court upheld the decision of the trial court in favor of the tenant.

Reasoning: The appeals court asked the owner to explain the back rent charges. He said that when the lease expired, the “base rent” was $300 per month, but he raised the rent to “about $390” per month. He conceded that there was nothing in writing to memorialize the increase and that he continued to accept the base rent that the tenant paid under the lease.

            The owner claimed that a 16-year statute of limitations applied to this claim because the lease was allegedly “sealed” by “triangle symbols” that the owner had drawn on the lease. The appeals court noted that, under New Jersey law, “every claim for rent or arrears of rent, founded upon a lease under seal shall be commenced within 16 years next after the cause of any such action shall have accrued.” It also said that a lease would be deemed to be sealed when a seal was “printed, impressed, or marked” on it.

            However, the court determined that the “seals” drawn on the lease didn’t officially seal the lease, and it appeared that they had been drawn on the lease after it had been signed. The tenant testified that the owner had never discussed “sealing” the lease, and he didn’t remember seeing the markings on the lease at the time it was signed.

            The appeals court found that after the expiration of the lease, the owner hadn’t exercised his right to evict the tenant and continued to accept rent from him “as tendered,” without ever notifying him of any deficiency. Therefore, the tenant became a holdover tenant and remained lawfully in possession under the terms of the original lease. He was free to terminate his tenancy at any time without further liability. Moreover, even assuming that the tenant owed back rent, the owner’s claim would be barred because it had been filed more than six years after the owner was allegedly owed back rent. The markings on the lease didn’t constitute a seal that would allot the owner 16 years within which to bring a claim.

• Shah v. Jones, November 2012