Court deals town setback in Hartz litigation

KEARNY –

Efforts by Kearny to delay a real estate developer from moving forward with a meadows project were dealt a setback by a recent court ruling.

Hudson County Superior Court Judge Barry Sarkisian, sitting in Jersey City, on June 27 ordered the town to issue an “estoppel certificate” to Hartz Mountain Industries.

Hartz, through its Hackensack law firm Pashman Stein Walder Hayden, had sued the town after it had refused to provide the legal document which Hartz said it needed to acquire a development loan.

Hartz, which has been granted redevelopment rights for a 9.5-acre section of Bergen Ave., off Harrison Ave., under a lease agreement with the town, had sub-leased a portion of the site to Cummins Power Systems, a Fortune 500 truck and marine-engine manufacturing and service firm, for technical training, parts sales and truck maintenance and repair.

As part of its commitment to the project, Hartz pledged to build a state-of-the-art truck maintenance facility for which it “sought approximately $19 million in financing from Teachers Insurance & Annuity Association,” according to court papers.

And, court papers said, “As a precondition to providing the financing, [TIAA] requested an estoppel certificate a legal document stipulating that there is a valid lease in effect, the rent is being paid and the prospective borrower is not in default of its obligations under the lease from Kearny as landlord ….”

After a period of negotiation between the parties, Kearny declined to provide the document, alleging that, among other things, the lease related to the Hartz project is “tainted” because it had its origins from a prior 30-year-old lease agreement between the town and a rival development firm linked to an effort at the time to bribe a former mayor and two ex-councilmen.

This argument by Kearny, however, was rejected by the court on the basis of government actions taken by the town and its Planning Board consenting to and validating a new lease agreement – along with the assignment of redevelopment rights – to Hartz for the property in question.

“Kearny has, time and again, acted in such a way to recognize the validity of the lease over the last 30 years, only to, in the past two years, change its position as to the validity of the … lease,” the court noted.

Moreover, the court said, “During this time, Hartz has reasonably relied on the belief that the … lease would be treated as valid by Kearny, given Kearny’s decades of consistent treatment of Hartz as the redeveloper of the … parcel, and has apparently spent over $8 million to remediate the property, found a tenant, and expended over $14 million on construction of necessary improvements to the property for that tenant. As a matter of equity, Kearny cannot now deny the validity of the lease and refuse to issue an estoppel certificate on that basis.”

While Kearny contended that there was no basis for issuing the certificate because the lease contained no specific language requiring that to happen, the court noted that the lease does direct Kearny to “take all necessary steps” to clear the way for the site’s redevelopment and the court interpreted that to include the certificate demanded by TIAA.

Kearny also alleged that Hartz violated its lease terms by improperly sub-leasing the property to Cummins, by failing to get an easement from the town before installing underground utility lines at the project site and by failing to pay the town additional rent but the court rejected these arguments as well.

The town has 30 days from the date of the court order to issue the certificate.

Kearny Mayor Alberto Santos said the town is reviewing its legal options, “which include appealing, negotiating a settlement, or continuing an equitable counterclaim the town filed to reform the payment terms of the lease that was not ruled upon by the judge.” 

 

Ron Leir | Observer Correspondent

Ron Leir has been a newspaperman since the late ’60s, starting his career with The Jersey Journal, having served as a summer reporter during college. He became a full-time scribe in February 1972, working mostly as a general assignment reporter in all areas except sports, including a 3-year stint as an assistant editor for entertainment, features, religion, etc. He retired from the JJ in May 2009 and came to The Observer shortly thereafter. He is also a part-time actor, mostly on stage, having worked most recently with the Kearny-based W.H.A.T. Co. and plays Sunday softball in Central Park, N.Y.