Anti-Eviction tenancies are subject to rent increase on notice. This means a landlord must serve a tenant notice increasing the rent for the subsequent tenancy. But, simply serving the notice as required by the Anti-Eviction Act doesn’t mean that the rent increase is legal. For a rent increase to be legal it must not unconscionable. Whether a rent increase is unconscionable turns on a five-part test.
The NJ Appellate Division dealt with the legality of a rent increase in Fromet Properties, Inc. vs. Delores Buel, 294 N.J. Super. 601. (App. Div. 1996). Residents of a mobile home park rented space pursuant to a written leases for two years at a monthly rent of $195 per month. The landlord sent written notice to each tenant terminating his or her respective tenancies effective in one month. The landlord offered tenants a new tenancy at the rate of $250 per month. The residents rejected the increase and continued to pay $195 per month as required by the former lease. The landlord initiated separate summary actions against tenants.
The court determined that a landlord should be prepared to prove that an intended rent increase is not unconscionable on the trial date. The court noted that it believed that most landlords will be prepared with financial information already available to them to meet the burden of proof imposed by the Anti Eviction Act. They added that where the landlord is not prepared, in the interest of justice the trial court can grant a short continuance.
The court reviewed the evidence and determined that the rent increase was not unconscionable even though the percentage of the increase was large. The determining factors are whether the resulting rent is so great as to shock the conscience of a reasonable person and were affected for the purpose of compelling the tenant to vacate.
The court concluded that in determining “unconscionability,” the trial judge may consider the following five-part test: (1) the amount of the proposed rent increase; (2) the landlord’s expenses and profitability; (3) how existing and proposed rents compare to rents charged at similar rental properties in the geographic area; (4) the relative bargaining position of the parties; and (5) based on the judge’s general knowledge, whether the rent increase would “shock the conscience of a reasonable person.”
It is important for landlords to remember that increasing rent is not a right and has its limits. A legal rent increase is not only about the numbers. Courts compare existing and proposed rents throughout the area, consider the bargaining positions among the parties, and consider whether the increase is a shock to a reasonable person. The five-part test takes into account several other factors. All of this suggests that there is no black and white formula for determining that a rent increase is lawful.
Since the facts of each circumstance vary, a landlord or tenant should consult an attorney with his/her specific circumstances. Offit Kurman practices landlord tenant law throughout New York and New Jersey assisting landlords and tenants in avoiding unnecessary and costly delays. The firm’s geographic practice area includes: New York City (Manhattan, New York County, Brooklyn, Kings County, Queens, Queens County, Bronx County, Staten Island, Richmond County) and New Jersey (Jersey City, Hoboken, Bayonne, Hudson County, Newark, Essex County, Woodbridge, Middlesex County, Paterson, Passaic County). The Firm invites you to visit the “Promises” page for our new way of doing business