Ambiguous wording on a contract agreement has just cost Lakewood Township taxpayers $9 million, a FAA News investigative report reveals.
Back in 1997, the Lakewood Industrial Commission struck a fantastic long-term ground lease with Blinds To Go, located at 1800 Cedar Bridge Avenue.
(The ground lease agreement provided that the LIC would lease the property to Blinds To Go which would construct their store on the premises.)
The initial term was 20 years. During this time Blinds To Go was not obligated to pay any rent.
The deal also included an option to extend the lease for up to 3 additional terms of 10 years each. During these renewal periods, there is an annual rent of $50,000.
Pertinently, the lease also included a buy-out option. The purchase price was to be $550,000 if exercised during the first year, or an additional $10,000 per year if exercised during the initial 20 year lease. If Blinds To Go was to wait until after the initial 20 years then they would need to purchase the property at "the then-current fair market value of the land, exclusive of all improvements thereon and thereunder."
Blinds To Go is now in position to purchase the property, which is now owned by Lakewood Development Corporation.
As it is now passed the initial 20 year term lease, Blinds To Go ordered an appraisal for the fair market value which came to $1.2 million and offered the LDC to purchase the property at that amount.
However, the LDC slammed the door in their face.
In response, back in July 2024, represented by Wall Township Attorney Ryan S. Malc, Blinds To Go filed a lawsuit in New Jersey Superior Court in Ocean County asserting that the LDC is in breach of contract.
In court filings, the LDC, represented by Attorneys Kean and Catherine Kim conceded that there is an enforceable purchase option - however, the dispute is that the LDC believes that the existence of the Ground Lease Agreement should not to be calculated in the preparation of the appraisal as the Ground Lease Agreement would effectively terminate upon Blinds To Go's purchase of the Property. Therefore, the correct appraisal value of the property is $10.2 million.
I.e. In the event the LDC sought to sell the property to a third party with the Ground Lease Agreement in full effect, the value of the property would be heavily diminished by the existence of the Ground Lease Agreement. However, as the subject sale is clearly between the landlord and tenant, Blinds To Go cannot dispute the fact that it will not be affected by the Ground Lease Agreement as the Ground Lease Agreement will become effectively null and void upon the sale.
At a court hearing held on Friday morning, Blinds To Go's attorney argued back that "the LDC is simply unhappy now with the terms they put into their own contract. The 'then-current fair market value of the land, exclusive of all improvements thereon and thereunder' that it says in the option agreement is the same as saying "exclusive of the fact that there is a Ground Lease Agreement in effect."
"Our purchase of the property should be looked at just as if anyone else would be purchasing the property - the fact that we have a long-term ground lease would lessen the value of the property for anyone else who would want to buy the property" Mr. Malc emphasized.
Judge Theresea Cunningham agreed that that is the plain meaning of the contract and granted summary judgment to Blinds To Go.
That's a $9 million loss for Lakewood taxpayers.
However, the sale price is not yet finalized. In accordance with the terms of the option agreement, Judge Cunningham ordered that the LDC obtain a new appraisal which calculates the existence of the ground lease. If this appraisal is substantially different from the procured by Blinds To Go then a third appraisal will be ordered to find a median amount.
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3 comments:
Bottom line is that Blinds To Go does fair and square have a legally binding contract.
The LDC's years-long legal fight against the store is simply based on Mike McNeil's mess up.
Mike McNeil claims he had an unwritten agreement with the store that they would hire mainly or only Lakewood residents and for whatever reason that agreement was not kept.
Due to this bad blood, Mike used the LDC's attorney to try to drive up the sale price of the property.
Alas, as Judge Cunningham has now ruled, a deal is a deal, Mike McNeil's bad blood not withstanding.
Blinds To Go filed tax appeals in 2023 and 2024.
Fun fact: The Township's Tax Appeal attorney just so happens to be Sean Kean's firm :)
That's incorrect.
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