On May 20, 2014, Partner Andrew Bayer and his litigation team received news that following oral argument before the New Jersey Supreme Court on May 7, 2014, the Court issued a decision of first impression in New Jersey. The Supreme Court agreed with our argument that the Bed Rights (including all rights title and interest to apply for a license to operate a nursing home) to a long-term care facility belonged to our client, GRE Jersey City, Inc., the owner of the property where the nursing home was sited in Jersey City. The Supreme Court issued an order declaring it had improvidently granted certification and it dismissed the appeal thereby affirming the decision of the Appellate Division and the Chancery Division in the matter known as Liberty House Nursing Home of Jersey City vs.. GRE Jersey City, Inc.
By way of background, GRE Jersey City, Inc.(“GRE”) developed a nursing home in Jersey City and ultimately leased it to Liberty House Nursing Home of Jersey City, Inc. (“Liberty House”) in 1971. Following the end of the lease term after Liberty House had exercised two renewal options, GRE issued a Notice to Quit. In response to the Notice to Quit, Liberty House contended that a Memorandum of Lease exchanged between the parties a year before the Notice to Quit issued constituted a binding agreement. GRE disagreed. After a 15 day bench trial before the Hon. Thomas P. Olivieri, PJ.Ch. (retired), the Chancery Division ruled in GRE’s favor and determined that GRE validly terminated Liberty House’s tenancy and found that the Memorandum of Lease did not create an enforceable agreement or provide Liberty House an option to renew. The Court further found that GRE was the sole owner of the right to apply for al license (the “Bed Rights”) to operate the 180 bed and that upon the termination of the lease, the right to seek a license to operate the facility reverted to GRE.
On March 25, 2013, the Appellate Division issued a per curium opinion affirming the Chancery Division’s judgment that the Memorandum of Lease did not constitute an agreement and that the Bed Rights indeed reverted back to GRE as that is what the parties intended through the lease agreement.
However, on September 11, 2013, the Supreme Court of New Jersey granted certification to determine two issues in the case: (1) Whether the Bed Rights belongs to the tenant who established and operated the exempted nursing home or, instead, to the landlord of the property on which the nursing home is operated; and (2) if the exemption belongs to the landlord, whether equity requires the landlord to pay the tenant operator for the value of the established business. The Supreme Court answered both questions in GRE’s favor.
This victory for the litigation team puts a close to a matter that was litigated for four years. “We are thrilled our client can take back and operate its nursing home after putting a close to this lengthy chapter,” a delighted Mr. Bayer explained. “Our litigation team has worked long and hard on this matter and I am pleased the Supreme Court and Appellate Division agreed with our legal analysis. While this is a significant victory for our client and our firm, we believe the precedent this case sets will prove critical as the issue of bed rights continues to be an important issue which needs to be addressed between long term care facility owners and long term care facility operators throughout this state.”
A copy of the Appellate ruling can be found here.