Articles Posted in NJ Landlord-Tenant Law

Local rent control laws are commonplace in New Jersey’s largest cities. Newark and Jersey City (New Jersey’s most populous cities) both maintain comprehensive rent control laws. The basics of these laws are well known. Rent control ordinances control the rent a landlord can charge and restrict the size of future rent increases. But, basic rent and rent increases are not the only financial obligations of tenancy. Many leases define late fees, attorney’s fees and other costs as “additional rent” to be collected from the tenant in an eviction action. Can these fees be collected from tenants in rent-controlled cities? Under Opex Realty Mgmt., LLC v. Taylor, (Law.Div.2019) the answer is: “No.” After Opex Realty (approved for publication on August 13, 2019), landlord and property managers of rent controlled properties should exercise care in drafting leases and initiating nonpayment evictions.

Opex Realty addressed a common-place but unresolved question. Does a rent control ordinance’s definition of “rent” necessarily preclude the collection of “additional rent” defined costs in a lease, when the collection of those costs exceeds the maximum rent under rent control? Prior to Opex Realty, tenants generally relied on Ivy Hill Park Apts. v. Sidisin, 258 N.J.Super. 19 (App.Div.1992). In Sidisin, the Appellate Division held that a landlord could not evict a tenant for “additional rent” (defined in a lease) when the same costs were not defined as “rent” under a rent control. The Opex decision arrives at the same conclusion of Sidisin, but with a different rationale.

Judge Petrillo’s Opex holding is that additional rent cannot be collected in a nonpayment eviction because the combination of additional rent and base rent exceeds the maximum allowable rent under rent control. Judge Petrillo held: “The court will not allow the landlord to circumvent rent control…and raise the rent beyond the lawful limits by labeling a late fee or legal fee as ‘additional rent…’” Emphasis added. The Opex decision is not that additional rent cannot be collected from rent controlled tenants. Rather, the decision is that additional rent cannot be collected when so doing exceeds the maximum legal rent. This is why, in dicta, Judge Petrillo added: “Were these tenants not already bearing the maximum rent allowed by law, the outcome might have been different.” A future post will address the practical implications of Opex and whether collecting “additional rent” is ever possible under rent control.

In May 2019, the City of Jersey City made a subtle but substantial change to its rent control ordinance. This change directly impacts the profitability of affected property owners. With the passage of Ord. 19-044, Jersey City revised the definition of “Fair Return” under its rent control ordinance from “6% above the maximum…demand deposit savings account interest rate” to “2.5% above…” The new 2.5%+ “Fair Return” applies to the “equity investment in real property.” The “equity investment” is considered only the “actual cash contribution of the purchaser” at closing, plus any additional principal payments.  The Jersey City ordinance follows the “Investment-Based Standard” and is the most restrictive constitutional rent control formula.

To understand the effect of Ord. 19-044,  it is helpful to restate the amended ordinance in plain language. Stated simply, the revised rent control ordinance “guarantees” a landlord a minimum net income of 2.5%+ measured against the landlord’s cash contribution to the purchase.  In its most basic application, the formula works as follows:

Purchase Price: $800,000

The Anti-Eviction Act, N.J.S.A. 2A:18-61.1(c) allows a New Jersey landlord to evict a tenant for “destruction, damage or injury to the [rental] premises” (Section 61.1(c)). Section 61.1(c) requires that a landlord prove two elements. The first can be described as the “mental state” of the tenant. The second is resultant harm from that mental state. The full text of Section 61.1(c) shows this. An eviction under Section 61.1(c) is permissible when: “The [tenant] has willfully or by reason of gross negligence caused or allowed destruction, damage or injury to the premises.” The threshold inquiry is how the damage occurred, whether it occurred willfully or by gross negligence. Proving this element at trial is a difficult task.
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A question often posed by New Jersey landlord is: “When should I file a nonpayment of rent case? After how many months?” Answering this question requires balancing the propriety of litigation relative to the amounts involved. Unscrupulous landlords may be tempted to “sit” on the rent for many months, allowing the tenant to accrue a balance that the tenant has no realistic chance of paying. In a case like this, the landlord relies on the tenant’s poor money management skills and hopes that the tenant cannot pay the all of the rent due on the court date. But, landlord-tenant law is too sophisticated for this game; the affirmative defense of “laches” may defeat the landlord’s claim.
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A New Jersey residential eviction action can only begin because the Landlord has “good cause” under the Anti-Eviction Act, N.J.S.A. 2A:18-61.1. Often, when a landlord pursues a tenant’s eviction there are many problems with the tenancy. For example, the tenant may fail to pay late fees and also pay habitually late. A tenant may disturb the peace and quiet of the other tenants and also refuse to sign a written lease. When the case finally comes to court, it is natural to try to resolve all outstanding issues. A recent appellate division opinion cautions: Be careful what you settle for, it may not be enforceable.
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The NJ Anti-Eviction Act provides the least amount of protection for a tenant causing damage to the landlord’s property. For most grounds for eviction (habitual late payment, violation of lease rules, increase in rent, etc.) the Anti-Eviction Act requires either a Notice to Cease and/or a one month Notice to Quit prior to filing the Complaint. In a damage case, the tenant is entitled to only three days of notice before the landlord files the Complaint. The short time frame is counterbalanced by the landlord’s burden. In an eviction for damage case, the landlord must prove both the cause and effect. Without both, the landlord’s case will fail.
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Many form leases (from sites like LegalZoom or RocketLawyer) contain stock terms designed to apply to most landlord-tenant relationships. Unfortunately, New Jersey landlord-tenant law and the facts of a commercial landlord-tenant relationship rarely lend themselves to “canned” contract terms. One overly (and rarely correctly) used contract term requires the tenant to comply with “all laws.” The sentence: “The tenant shall comply with all laws” begs the question: When has the tenant failed to comply with all laws? In a recent case, the Firm successfully defended a commercial tenant from a landlord’s aggressive interpretation of the “comply with all laws” requirement.
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Oral residential tenancies in New Jersey are an invitation to chaos. A prior post explained the basic terms of an oral tenancy. Those terms are the amount of the rent and the size of the space. Equally important is the identity of the tenant and the landlord’s right to know who occupies its property. Often, a landlord will purchase a multi-family building and find unauthorized occupants in apartments presumably rented to a named tenant. Without a written lease defining the tenants, the question is: Who is the tenant in the apartment and what rights (if any) do they have?
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New Jersey residential tenancies exist in two forms. Those with a written lease and those without. Written leases are more desirable for the simple (and obvious reason) that the terms of the tenancy are defined. Oral tenancies generally lack defined terms (unless implied from conduct). This vagueness is problematic. Whether a landlord purchases a building with an existing oral tenancy or creates one, the problems remain the same. The central question is: How does one define the terms of an oral tenancy?
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Municipal housing code citations can be a nightmare for NJ landlords. A prior post explained how some tenants intentionally or neglectfully damage their apartment and sic the city on the landlord. These housing code citations can be used by the tenant to form the basis of habitability or “Marini” withholding. Even worse, housing code citations carry onerous municipal fines. In light of the dual damage of landlord-tenant habitability withholding and municipal fines, NJ landlords should be aware of the technical requirements of the International Property Maintenance Code (“IMPC”). Housing code violations should be appealed when the notice requirements are not strictly followed by the city. Most importantly, the Notice should identify which party is responsible for “repair” vs. “maintenance.”
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