A New Jersey appeals court has ruled that a tenant that defaults on a rental agreement can’t avoid paying lease obligations, even if the landlord finds a higher-paying replacement.

According to the court filing, Brake-O-Rama stopped paying rent to its landlord, 450 North Broad LLC, in February of 2016 with four years left on the lease. 450 North Broad replaced Brake-O-Rama with Family Dollar in the Elizabeth, New Jersey, property. The retailer agreed to pay almost double the rent and invest $200K into the property for improvements.

The landlord filed a lawsuit against Brake-O-Rama in July 2018, seeking $121,096.83 in damages plus court costs and legal fees. 

The tenant argued that 450 North Broad wasn’t entitled to any delinquent rent payments because it hadn’t suffered any monetary loss, an argument that was rejected by both the lower court and reiterated upon appeal.  

“In short, commercial landlords should be aware that they still may have a cause of action against a defaulting tenant even if they are able to strike a more favorable deal with a replacement tenant,” Giordano, Halleran & Ciesla's Donna McBarron, a New Jersey-based attorney who focuses on commercial leases, said in a press release.