New Jersey Appellate Division Warns Commercial Landlords Against Engaging In “Self-Help” By Locking Bad Tenants Out Of Properties

December 4, 2024

By: Carl L. Engel

The Appellate Division of the New Jersey Superior Court, in the case BPREP 530 Duncan LLC v. Standard Logistics LLC, has just delivered a warning to commercial landlords about wrongfully locking tenants out of leased space. A landlord installed locks and hired security to prevent a tenant from entering a leased warehouse facility after hearing reports from a neighbor that it had been dumping an unknown material on the grounds at night. When the landlord sued the tenant for unpaid rent, the tenant responded that it had been pouring asphalt to repave the driveway consistent with its obligation under the lease to keep the property clean, and that it should not have to pay rent for months when it was locked out of the premises. The Appellate Division has just instructed the trial court to conduct a hearing to view evidence on the alleged dumping. If the landlord is unable to produce evidence to show that the tenant was dumping on the property, not only will it forfeit the unpaid rent, it may also be liable to the tenant for lost profits and other damages resulting from its inability to use the warehouse during the period that it was locked out.

In 2015, Standard Logistics LLC (“Standard Logistics”) entered into a ten-year lease with Grenwolde Investment Corp. (“Grenwolde”) for the use and occupancy of a commercial warehouse located in Jersey City.  In March of 2020, Grenwolde sold the warehouse to BPREP 530 Duncan LLC (“BPREP”), and the lease was amended to recognize BPREP as the new landlord.

Standard Logistics thereafter began to miss rent payments and, in March of 2022, BPREP notified it that it was in default of the lease. On February 7, 2023, BPREP filed a lawsuit against Standard Logistics for possession of the property and unpaid rent. Two months later, the parties reached a settlement agreement that allowed Standard Logistics to remain at the property until October 31, 2023. The agreement required that Standard Logistics (i) remove all of its property and trash from the premises, (ii) make three payments to BPREP of $46,058.39, (iii) execute a consent judgment for possession of the property, and (iv) execute a consent judgment for the rent remaining unpaid after the three payments. A consent judgment allows a plaintiff to enter a judgment against a defendant with the defendant’s consent, rather than the usual practice of waiting for a judge to enter judgment after a trial or a hearing. If Standard Logistics failed to perform any of these items, BPREP was authorized to start collecting Standard Logistics's assets to satisfy the consent judgments without having to go through the process of litigation and trial.

On September 19, 2023, the owner of a neighboring property informed BPREP that Standard Logistics had been bringing truckloads of some unknown material onto the property in unmarked trucks and dumping and spreading it around the premises. Over the next two days, representatives from BPREP observed the dumping and spreading of the material there, then hired security to prevent further unauthorized dumping. On September 29, 2023, BPREP notified the court that Standard Logistics had breached the settlement agreement and submitted the consent judgments to begin collection proceedings.

On January 3, 2024, BPREP filed a motion to enforce the settlement agreement. Specifically, BPREP alleged that Standard Logistics had violated the settlement agreement in four ways: (i) by failing to vacate the premises by October 31, 2023, (ii) by failing to make the rental payment due on October 1, 2023, (iii) by failing to leave the premises in a “broom clean” condition, and (iv) by dumping the unknown material. In response, Standard Logistics claimed that BPREP had violated the agreement by resorting to “self-help” measures, i.e., wrongfully locking it out of the premises and hiring security to prevent it from entering. Standard Logistics also contended that it had been repaving the driveway consistent with its obligation to leave the premises in good condition, and had not been dumping on the property. 

After an oral argument on February 2, 2024, the trial court denied BPREP’s motion to enforce the settlement agreement, finding that it had “jumped the gun and taken over the property” in response to reports of dumping that were incorrect.  BPREP appealed.

On November 27, 2024, the Appellate Division reversed the trial court, and ordered that it hold an evidentiary hearing on the issue of dumping. The Appellate Division reasoned that the trial court had been within its authority when it determined that, had BPREP resorted to locking Standard Logistics out of the premises without justification, then BPREP could not enforce the settlement agreement. However, the Appellate Division found that the trial court had abused its discretion by not first holding an evidentiary hearing to find whether BPREP had in fact locked Standard Logistics out of the property improperly. Before the trial court could refuse to enforce the agreement, BPREP was entitled to an opportunity to present evidence that Standard Logistics had been dumping rather than repaving. The Appellate Division remanded the case back to the trial court so it could hold this hearing.

The case serves as an important warning to commercial landlords that the general prohibition against the “self-help” measure of locking a bad tenant out of a property applies to them as much as it does to residential landlords. The strong public policy against landlord self-help is not abated simply because the tenant made “homeless” by the action is a company rather than an individual. Moreover, self-help measures come at great risk to the landlord. In the instant case, if the trial court finds that Standard Logistics was repaving the driveway rather than dumping, BPREP will not only forfeit the rent owed for the period during which Standard Logistics was locked out, but it may also be liable for Standard Logistics’s lost profits resulting from its inability to use the facility.  Therefore, commercial landlords should resist the urge to lock out bad tenants before the end of the lease, or their losses may increase beyond unpaid rent.