New Jersey Landlord-Tenant 101: Post-Judgment Issues

This will be the last in a series of posts discussing some of the typical questions/issues raised by residential landlords in New Jersey.  So far, we’ve touched on pre-tenancy issues, how to handle a security deposit and issues surrounding the eviction process (grounds, notices and defenses).  We’ll finish with questions about what happens after judgment for possession is entered for the landlord.

Once a Complaint seeking possession is filed by a landlord, there can only be one of two possible results: possession of the premises stays with the tenant; or, possession is awarded to the landlord. (An award of money damages is not permitted and must be maintained separately.)  The first step for a landlord in gaining possession is to secure a “judgment for possession.”  A judgment for possession can be entered as follows: upon tenant default; by consent of the parties; following a trial; or, upon tenant breach of a settlement agreement.

Upon tenant default (failure to appear), and with limited exceptions (landlord acquired title from tenant or gave tenant an option to purchase) which first require adequate proofs in open court, judgment for possession may be entered directly by the clerk of the court upon submission of appropriate affidavits from the landlord and landlord’s attorney.  A judgment for possession by consent must be written, signed by the parties, presented to the judge for approval and may require judicial review in open court.  It also requires appropriate affidavits from the landlord and attorney.  A judgment for possession after trial will have addressed all issues covered by the affidavits to the satisfaction of the judge.  In a judgment for possession upon tenant breach of a settlement agreement affidavits are also used and the landlord must apply to the court for enforcement.

Here are the most common questions once a judgment for possession has been entered:

POST-JUDGMENT ISSUES

Q:  OK, we have the judgment for possession, what now?

A:  The next step is to apply for issuance of a “Warrant of Removal” from the Court.  A Warrant of Removal is issued to a Superior Court officer (Constable) and is the judicial authority by which the Constable is commanded to remove “all persons” from the premises and put the landlord in full possession thereof.  Except when a seasonal tenancy is involved, a Warrant of Removal cannot be issued until 3 business days after entry of the judgment for possession.  Once the Warrant is issued by the Court, it must then be served on the tenant by the Constable.  The Warrant must include language notifying the tenant of the right to seek to “stay” the eviction. (If granted, a “stay” could be up to 6 months if tenant can show significant hardship because of the unavailability of other dwelling options.  On the plus side, to qualify for a "stay" a tenant must cure all rent arrearages, cannot be disorderly or damage the premises and pay rent on time during the “stay.”)

In residential tenancies, a Warrant of Removal cannot be executed until 3 business days after service on the tenant.  In other words, even in the best of circumstances it will take at least 8 days from judgment for possession before eviction of residential tenants can be completed.  If the landlord fails to apply for the Warrant within 30 days from judgment for possession or if the Warrant is not executed within 30 days from service on the tenant, the landlord will then be required to apply to the Court with written notice to the tenant and seek judicial permission for issuance or execution of the Warrant, as the case may be.  In other words, a landlord should not rest on a judgment for possession.  Upon executing a Warrant of Removal – i.e., removing the tenants from the premises, if necessary – a Constable may use as much force as necessary.

Q: Can I keep and apply the tenant’s security deposit?

A:  Sorry, a landlord must still comply with New Jersey’s Rent Security Deposit Act (Security Deposit Act), N.J.S.A. 46:8-19 to N.J.S.A. 46:8-26, when a tenant is being evicted.  Generally, within 30 days after termination of the lease – i.e., when a judgment for possession is awarded -- a landlord must provide a tenant with the following in person or via certified or registered mail: an itemized accounting of the interest earned on the security deposit and the deductions made from same under the lease; and, a sum equal to the security deposit plus accrued interest less any deductions made under the lease. (Different rules apply to displaced tenants and victims of domestic violence.)  This rule applies even if the tenant is in default under the lease, but that does not necessarily mean that the landlord has to send a check to the tenant along with the itemized accounting.

Generally, failure to properly handle a tenant’s security deposit within 30 days of lease termination exposes a landlord to damages at double the amount of the deposit wrongfully withheld; emphasis on "wrongfully withheld."  So, if a landlord sends an itemized accounting to the tenant within 30 days with deductions equal to or greater in value than the amount of the security deposit, and has lease language and evidence supporting the deductions, the landlord should be safe from any “double damage” claims by the tenant and no security should be returned to the tenant.  The important things are to get the written accounting out to the tenant within 30 days (even a few days delay can be costly), to have evidentiary support for all deductions and to return any balance after deductions.

It sounds counter-intuitive, I know, especially in “non payment of rent” cases.  The tenant owes the landlord money and the landlord is holding money from the tenant.  However, under the law a landlord is holding the security deposit in trust for the tenant.  In other words, it is still technically the tenant’s property.  The temptation may be to hold onto the deposit and apply it to unpaid rent but the better move would be to comply with the requirements of the Security Deposit Act.  If you comply with the Act and have grounds for keeping the entire deposit, have at it.  However, if you are required to return some or all of the deposit to the tenant under the Act, than do so.  Either way, consider suing the tenant for monetary damages caused by the tenant’s default, including any unpaid rent.

Q:  The tenant’s gone but left a bunch of property behind. Can I toss it?

A:  Maybe, but not so fast.  There is still work to be done.  A landlord must first comply with New Jersey’s Abandoned Property Act, N.J.S.A. 2A:18-72, et seq.  Under the Abandoned Property Act, after proper notice, a landlord may dispose of tangible goods, chattels, manufactured or mobile homes or other personal property (except for motor vehicles) left upon the premises by a tenant only if the landlord reasonably believes that the tenant left the property with no intention of reclaiming the property and a warrant of removal has been executed or the tenant has provided written notice that s/he is voluntarily giving up possession of the premises.

Before getting rid of the tenant’s abandoned property, a landlord must first give written notice to the tenant by certified/RRR or receipted first class mail.  The notice should be sent to tenant’s last-known address, even if the rental premises in question, and any known alternative addresses with a “Please Forward” endorsement on the envelope.  (There are additional notices required if we’re talking about a manufactured or mobile home.)  The notice must include the following: a demand for removal of the property by a specific date which cannot be more than 33 days after the mailing date (different notice periods for manufactured or mobile home); notice that if the property is not removed in a timely manner the landlord may dispose of the property by sale and/or destruction; and, notice that if the tenant claims the property in a timely manner the landlord must make it available without requiring the tenant to pay any unpaid rent.  After providing notice to the tenant, and except for perishable food and pets, a landlord must store all other property in a safe place and exercise reasonable care over it but is entitled to reasonable storage charges and costs incidental to storage.

If no response is received from the tenant, than the property is conclusively presumed to be abandoned.  If the tenant responds to the notice – in writing or orally – before the deadline indicating that s/he intends to reclaim the property in a timely manner but then fails to do so, abandonment will not be presumed until the deadline or 15 days from the tenant response, whichever is later.  Once the property is conclusively presumed to be abandoned – i.e., the landlord has jumped through the above hoops concerning notice to the tenant – than and only than may the landlord dispose of the property by sale, destruction or a combination of both.  A landlord may deduct from any sale proceeds the reasonable costs of notice, storage and sale as well as any unpaid rent or charges not covered by the security deposit.  After deducting those amounts, any remaining proceeds must be sent to the tenant along with an itemized accounting.  If the tenant cannot be found after due diligence, than any remaining proceeds must be deposited with the Court and, if not claimed w/in 10 years, then goes to the State.

If the tenant actually shows up to reclaim the property in a timely manner, s/he is expected to reimburse the landlord for the reasonable cost of storage, including transferring the property to storage, and the landlord is only liable for damage to the property caused by landlord’s deliberate or negligent act or omission.

Good faith compliance with the Act constitutes a complete defense to any tenant action for loss or damage to property disposed of by the landlord.  If a landlord fails to comply with the Act, the tenant cannot be held liable for payment of any storage or removal costs and the landlord could be held liable for up to twice the actual damages sustained by the tenant.

New Jersey Landlord-Tenant 101: Evictions -- Defenses

EVICTION ISSUES -- DEFENSES

One last post concerning the issue of residential evictions in New Jersey.  So far, we’ve covered the grounds for eviction of a residential tenant and the various noticesthat are required in connection with same.  Those posts turned out to be lengthier than originally anticipated, which just go to show that there are numerous “moving parts” to the landlord-tenant relationship, especially when it comes to evictions.  In this post, we’ll touch on some of the standard defenses to an eviction action and in the next, and last, post in this series, we’ll highlight some post-eviction issues.

Here’s the question I get a lot from residential landlords, when I tell them that eviction might not be possible: “The tenant did or did not do “X.” What do you mean I can’t evict them?”  This question usually comes after we’ve walked through the entire case.  Unfortunately, sometimes, even when a tenant is “behaving badly” under the lease, there may be one or more things the tenant can point to which enables them to avoid eviction.  Here are some of the defenses available to residential tenants:

  • Bankruptcy: the filing of a bankruptcy petition stays an eviction case unless judgment for possession was already awarded or the eviction filing is based on recent “endangerment” or “illegal use of controlled substances” in or about the premises. Even if those circumstances apply, a landlord still has to seek permission from the bankruptcy court to move forward.
  • Non-compliance with the Landlord Registration Actif the landlord has not complied with this Act, the Court has no jurisdiction and no judgment for possession can be entered against the tenant.
  • Non-compliance with the Security Deposit Actfailure to comply with the notice requirements of this Act could allow a tenant to apply the security deposit to rent owed and thereby defeat a “non-payment” case.
  • Habitability: the issue of habitability can be raised as a defense to a “non-payment” case by showing that the tenant is entitled to an abatement or offset of rent for landlord’s breach of the warranty of habitability.  All leases of residential premises in New Jersey include an implied warranty of habitability.  The landlord warrants in part that there are no latent defects to the premises’ “vital facilities” and that the vital facilities will remain in usable condition during the entire lease term.  To advance this defense, the tenant must have provided the landlord with timely and adequate notice with an opportunity to repair and the item of disrepair must directly affect the habitability of the premises.  If the repairs are not done after notice to the landlord, the tenant may make the repairs and deduct expenses from future rents.  If the landlord then pursues eviction based on non-payment of rent, the tenant in response can argue that s/he is entitled to offset, abatement or rebate. (This is generally referred to as a “Marini defense” based on the 1970 case from which it originated.)
  • Waiver: allowing a lease to renew and/or acceptance of rent by a landlord withknowledge of a breach of the lease may constitute waiver of all past breaches.
  • Retaliation: generally, N.J.S.A. 2A: 42-10.10 prohibits a landlord subject to the Anti-Eviction Act from filing for eviction or substantially altering a tenant’s lease in retaliation for any of the following tenant activity: seeking to enforce rights under the lease or the laws of New Jersey or the U.S.; seeking to remedy a landlord’s alleged violation of any health or safety law or regulation; or seeking to organize a lawful organization, e.g., a tenant organization.  If any such actions are taken w/in 90 days of tenant activity, a rebuttable presumption that the landlord’s action is retaliatory is established.
  • Unconscionability: this defense usually comes up in connection w/ a rent increase.  If the premises is subject to a rent control ordinance make sure any rent increase is done in compliance with same.
  • Failure to provide relocation assistance under N.J.S.A. 2A:18-61.1(g): if alandlord is forced to permanently board up or demolish the premises due to housing code violations which are economically unfeasible to correct, relocation assistance under N.J.S.A. 52:31B-1 must be provided before any Warrant for Possession will be issued.
  • Absence of timely or adequate notice to the tenant: as discussed at length in an earlier post, virtually all but one grounds for eviction (non-payment of rent) require some form of advance notice to the tenant before filing for eviction.  If a landlord fails to comply with the applicable notice requirements, than the court has no jurisdiction and eviction will not be granted.
  • Payment of Rent: last, but certainly not least, payment of rent due and owing is a “defense” to an eviction case which is oftentimes welcome by a landlord.  Payment of rent will result in dismissal of the case.

The next post and last post in this current series will discuss certain post-eviction issues faced by landlords. 

New Jersey Landlord-Tenant 101: Evictions -- Notices

EVICTION ISSUES -- NOTICES

I’d like to continue talking about some of the issues that flow from the question of whether a tenant can be evicted.  As discussed in the last post to this series, to answer that question we must first determine which eviction statute applies and whether the circumstances at hand qualify as grounds for eviction under that statute.  Once we know if there is a statutory basis for eviction, we then have to determine if the tenant was entitled to any notice under the applicable statute before filing for eviction, if notice was required was it sent in a proper and timely manner and if the tenant has any viable defenses to eviction.  In today’s post, we’ll pick up with the various notice requirements before a landlord can file for eviction.

As discussed earlier, in New Jersey there are two statutes under which a landlord can file to evict a tenant.  To figure out which statute is applicable and, by extension, which notice requirements apply, we first have to determine where the owner of the property lives and the number of units available for rent. 

Generally, the Summary Dispossess Act (“SDA”), N.J.S.A. 2A:18-53, et seq., applies to commercial tenancies, hotels/motels/guest houses renting to a transient guest or seasonal tenant and residential tenancies where the owner lives on the property and there are 2 or fewer units available for rent (think duplex or triplex with the owner living in a unit or an owner-occupied house with the garage lawfully converted to 1-2 rental units). 

The Anti-Eviction Act (AEA), N.J.S.A. 2A:18-61.1, et seq., applies to all other residential tenancies in New Jersey.  It covers single-family homes to 500-unit apartment complexes and everything in between.  It is fair to say that the AEA covers over 90% of the residential tenancies in New Jersey.

There are generally 3 different types of notice, but not all apply to each of the grounds for eviction:

  • A Notice to Cease is a warning to the tenant to change his/her evil ways and fly straight. It is required only under certain grounds for eviction found in the Anti-Eviction Act.  The AEA does not specify how a Notice to Cease should be served but, as a general rule, I recommend service of all notices personally or by certified/RRR and regular mail.
  • A Notice to Quit informs the tenant that the tenancy will be terminated under the eviction grounds at issue and, practically speaking, is required under all grounds for eviction except non-payment of rent.  Under the SDA, a Notice to Quit technically must be served personally upon the tenant or upon a family member above the age of 14; in other words, service by mail is technically not an option.  However, sending the Notice by certified mail might suffice if signed for by the tenant or a family member older than 14.  Under the AEA, service of Notice to Quit may be done personally or by certified/regular mail.
  • A Demand for Possession is the final type of notice required and must provide the actual date by which the tenant must return possession of the unit to the landlord.  Like the Notice to Quit, as a practical matter a Demand for Possession should be served in all cases except non-payment of rent.  For purposes of service, a Demand for Possession is oftentimes combined with the Notice to Quit but, make no mistake, they are not one and the same.  If you plan to combine a Notice to Quit and a Demand for Possession into one notice, you best make sure the requirements of both are satisfied.

As a general rule, all notices to tenants should be in writing and provide sufficient detail, especially as to the offending behavior and/or grounds for eviction.  Most statutory provisions require it and it is just smart business in any event.  The court prefers things in writing and the more detail the better.

The type and timing of the required notice to the tenant will depend on the particular grounds for eviction being prosecuted.  Here is a summary of the notice requirements under the Summary Dispossess Act (“SDA”), N.J.S.A. 2A:18-53, et seq.:

 

Here is a summary of the notice requirements under the Anti-Eviction Act (AEA), N.J.S.A. 2A:18-61.1, et seq.:  (Sorry if this Table is blurry, as this is my first time working w/ images of this size in a post.  Please contact me office if you would like a clearer copy.)

 

 Why is the issue of “notice” important: because failure to comply with the applicable notice requirements will deprive the court of jurisdiction. In other words, failure to provide timely/adequate notice to the tenant will likely result in dismissal of the eviction suit.


The next post in this series will discuss typical defenses to an eviction action.
 

New Jersey Landlord-Tenant 101: Eviction Issues -- Grounds

I’d like to jump back in to a series of blog posts touching on some of the residential “tenancy” questions that often come from New Jersey landlord clients.  We’ll probably revisit this "New Jersey Landlord-Tenant 101" series periodically moving forward but, for right now, I want to finish up with some issues/questions related to the following topics: “pre-tenancy” concerns; how should a tenant’s security deposit be handled; how and when can a tenant be evicted, and what should be done with a tenant’s property after eviction.

So far, we’ve covered some basic questions concerning “pre-tenancy” issues and how to handle a residential security deposit.  Now, I’d like to touch on some very basic residential eviction issues in a 2-parter.

EVICTION ISSUES – Grounds for Eviction

Q: The tenant did or did not do “X.” Can I evict him/her?

A: The short answer is: it depends.  Generally speaking, it depends on which eviction statute applies, whether proper and timely notice was provided to the tenant and whether the tenant has any viable defenses to eviction.  As to which eviction statute applies:

As a preliminary matter, please remember that “self-help” is never available when dealing with a residential eviction.  A complaint seeking eviction must always be filed with the Court, permission granted and all Court Rules followed before a residential tenant can be evicted.  In New Jersey, there are two statutes under which a landlord can file to evict a tenant and the permissible grounds for eviction differ under each.  To figure out which statute applies, we first have to determine where the owner of the property lives and the number of units available for rent.

Generally, the Summary Dispossess Act (“SDA”), N.J.S.A. 2A:18-53, et seq., applies to commercial tenancies, hotels/motels/guest houses renting to a transient guest or seasonal tenant and residential tenancies where the owner lives on the property and there are 2 or fewer units available for rent (think duplex or triplex with the owner living in a unit or an owner-occupied house with the garage lawfully converted to 1-2 rental units).

The Anti-Eviction Act (AEA), N.J.S.A. 2A:18-61.1, et seq., applies to all other residential tenancies in New Jersey.  It covers single-family homes to 1000-unit apartment complexes and everything in between.  It is fair to say that the AEA covers over 90% of the residential tenancies in New Jersey.

Here is a summary of the permissible grounds for eviction under the Summary Dispossess Act:

  • When a tenant “holds over” in the rental unit after expiration of the lease term.  (It is important to note that in this case no “cause” is needed to justify the eviction.  If covered by the SDA, and subject to timely/adequate notice, the mere fact that the tenant remains in possession past the established end of the lease term is sufficient.  This is in direct contrast with the AEA, which expressly requires “good cause” for evicting a tenant.)
  • When a tenant remains in possession of the unit after failing to pay rent that is due and owing to the landlord.
  • When a tenant is so disorderly as to destroy the peace and quiet of the landlord, other tenants or the neighborhood. (Subject to timely/adequate notice.)
  • When a tenant willfully destroys, damages or injures the property. (Subject to timely/adequate notice. Willful destruction is tough case to make.)
  • When a tenant constantly violates the landlord’s rules and regulations; provided that the tenant accepted them in writing or they were made part of the lease.  (Subject to timely/adequate notice.)
  • When a tenant otherwise breaches the lease; provided that the landlord has reserved a “right of reentry” in the lease for the breach in question. (Subject to timely/adequate notice.

By contrast, the Anti-Eviction Act requires “good cause” for eviction and specifies 18 grounds for same.  In short, unless and until a tenant’s actions or circumstances fit within one or more of the specified grounds for eviction in the AEA, s/he cannot be evicted and has a virtual lifetime lease to the unit.  That is why it is so important to address problematic tenants head-on when the opportunity presents itseld.  Here is a quick summary of the permissible grounds for eviction under the Anti-Eviction Act without reference to the various “notice” requirements:

  • Tenant fails to pay rent due and owing.
  • Tenant is disorderly, destroying peace and quiet.
  • Tenant willfully or grossly negligent in destruction of the premises.
  • Tenant substantially breaches landlord’s rules/regulations.
  • Tenant substantially violates the lease agreement; provided that a “right of reentry” is reserved.
  • Tenant substantially violates a public housing lease provision prohibiting illegal use of drugs or other illegal activities.
  • Tenant fails to pay rent after reasonable increase.
  • Landlord must abate housing or health code violations.
  • Landlord seeking to permanently retire building or Mobile Home Park from residential housing market.
  • Tenant refuses to accept reasonable lease changes at end of term.
  • Tenant habitually makes late payment of rent.
  • Landlord seeking to convert property to condominium or cooperative.
  • Landlord of a building or Mobile Home Park -- constructed as or being converted to condominium, cooperative or fee simple ownership -- seeking to personally occupy unit or sell it to person who intends to personally occupy it.
  • Tenant’s occupancy of unit is conditioned upon employment by landlord and employment is terminated.
  • Tenant is convicted for drug use, possession, manufacture, etc.
  • Tenant is convicted for assault/threats against landlord, landlord’s family or employee.
  • Landlord can prove by a preponderance of the evidence that the tenant is liable for theft, assault/threats or drug use, possession, etc. (No conviction required.)
  • Tenant convicted of theft from landlord, the premises or another tenant.

Remember: evictions can be very fact-driven situations – with a lot of “she said/she said” – so it is important to document the grounds for eviction when they occur and send the proper notices.  If you have a potential eviction situation, I’m always happy to kick it around.

The next post in this series will finish up with eviction issues.  We’ll tackle notices and potential defenses to eviction. 
 

New Jersey Landlord-Tenant 101: Security Deposit Issues

I am periodically contacted by New Jersey landlords with what I call “tenancy” questions concerning a current or prospective residential tenant, e.g., what happens if the Landlord Registration Statement was not properly filed/served/posted, how should a tenant’s security deposit be handled, can this or that tenant be evicted, and what should be done with a tenant’s property after eviction.  I am always happy to add my two cents, as making informed decisions can help a landlord to maximize the value of their property.  I thought it might be helpful to cover some (not all) of the basic questions and related topics in a series of blog posts.  In the first post, we talked about some of the pre-tenancy issues that come up.  Today, we’ll talk about security deposit issues.

SECURITY DEPOSIT ISSUES

Q:  When must a landlord comply with New Jersey’s Rent Security Deposit Act (Security Deposit Act), N.J.S.A. 46:8-19 to N.J.S.A. 46:8-26?

 

A:  The Security Deposit Act applies to all residential landlords except for owner-occupied premises with not more than 2 rental units. BUT: even residential tenants generally not covered by the Act -- i.e., owner living on-site with no more than 2 rental units – can invoke the provisions of the Act with 30 days notice to the landlord, so pretty much any landlord in NJ could be subjected to it.

 

Q:  How much can be held as a security deposit?

 

A:  A residential landlord cannot hold more than 1½ times the monthly rent as security.  Obviously, there is little sense in holding less than the maximum amount permissible.  Upon any annual rent increase, a landlord cannot ask for more than 10% of the existing deposit as additional security.  A refundable “pet deposit” is considered part of the security deposit when calculating whether a landlord is holding security in excess of the maximum permissible amount. 

 

Q:  How must a security deposit be handled under the Security Deposit Act?

 

A:  Security deposits must be maintained in NJ-based financial institutions.  A landlord handling 10+ units is required to place a tenant’s security deposit in either an insured money market fund or a federally insured bank account with interest set at least quarterly and payable at a rate equal to the average rate of interest paid by the bank or fund on similar money market accounts.  A landlord handling less then 10 units is required to place a tenant’s security deposit in a federally-insured bank account with interest payable at a rate equal to the bank’s savings account.  A landlord may place all security deposits in one account so long as the landlord complies with all other requirements of the Security Deposit Act (notice, etc.).  A landlord handling units for “seasonal use or rental” (no more than 125 consecutive days for residential purposes by person having permanent residence elsewhere) does not have to place security deposits in a money market fund or bank account.

 

It is important to remember that all interest earned on the security deposit now belongs to the tenant (2004 law change) and that the interest must be paid to the tenant or credited toward payment of rent due on an annual basis (either lease anniversary or January 31).

 

It is also important to remember that no deductions may be made from the security deposit of a tenant while the tenant remains in possession of the rental unit.  In other words, a landlord is not permitted to apply the security deposit against unpaid rent or damages while the tenant is still living in the unit.  In contrast, a tenant is permitted to apply the security against unpaid rent if the landlord is non-compliant with the Act. (See below.)

 

Q:  What notices must be provided to a tenant and when?

 

A:  A landlord must give each tenant supplying the security deposit with the following written notice: the name and address of the investment company (money market fund) or bank holding the security deposit; the type of account; the current rate of interest; and the amount of the deposit.  A landlord must provide this notice as follows:

  • Within 30 days of receipt of the deposit from the tenant.
  • Within 30 days of moving the deposit from one bank or investment company to another or one account to another, unless change in bank or account occurs less than 60 days from the annual interest payment in which case the change notice can be provided with the notice accompanying the annual interest payment (see below).  In the case of a bank or company merger, the landlord has to provide the required notice to the tenant within 30 days of notice of the merger.
  • At the time of each annual interest payment.
  • Within 30 days after transfer or conveyance of ownership or control of the rental property.

Q:  What happens if the required notices under the Act are not provided?

 

A:  If a landlord fails to provide the notice(s) required under the Security Deposit Act, a tenant can provide the landlord with written notice that the security plus an amount representing interest at 7% annually should be applied on account of unpaid rent.  In addition, the tenant is not required to make any further security deposit and the landlord is not permitted to make any further demands for additional security.  The same relief is available to a tenant if a landlord fails to invest/deposit the security or to pay/allocate the interest to the tenant.  In other words, if a landlord fails to handle the security as required by the Act, the tenant can apply the security to unpaid rent and the landlord cannot replace it.  A landlord is given a small reprieve against this dramatic relief: if a landlord fails to pay the annual interest or provide the annual notice (see above), a tenant must first give the landlord written notice and 30 days to comply before the security can be applied against unpaid rent.

 

Q:  How should a security deposit be handled when a tenant leaves the unit?

 

A:  Generally, within 30 days after termination of the lease, a landlord must provide a tenant with the following in person or via certified or registered mail: an itemized accounting of the interest earned on the security deposit and the deductions made from same under the lease; and, a sum equal to the security deposit plus accrued interest less any deductions made under the lease.  (Different rules apply to displaced tenants and victims of domestic violence.)  This rule applies even if the tenant is in default under the lease.  In other words, even if a landlord believes that a tenant has defaulted under the lease, the landlord must still comply with the above requirements, but that does not necessarily mean that the landlord has to send a check to the tenant along with the itemized accounting. (See below.)

 

Q:  What happens if a security deposit is improperly handled when a tenant leaves the unit?

 

A:  Generally, failure to properly handle a tenant’s security deposit within 30 days of lease termination exposes a landlord to damages at double the amount of the deposit wrongfully withheld.  For landlords, the emphasis should be on “wrongfully withheld.”  In other words, the tenant is not necessarily entitled to double the amount of the full security deposit; instead, the tenant is only entitled to double the amount of the security that the landlord was not permitted to hold on to.  So, if a landlord sends an itemized accounting to the tenant within 30 days with deductions equal to or greater in value than the amount of the security deposit, and has lease language and evidence supporting the deductions, the landlord should be safe from any “double damage” claims by the tenant and no security should be returnable to the tenant.  The important things are to get the written accounting out to the tenant within 30 days (even a few days delay can be costly), to have evidentiary support for all deductions and to return any balance after deductions.

  

The next post in this series will discuss the various grounds for eviction available to a landlord in New Jersey.

New Jersey Landlord-Tenant 101: Pre-Tenancy Issues

I am periodically contacted by New Jersey landlords with what I call “tenancy” questions concerning a current or prospective residential tenant, e.g., "what happens if the Landlord Registration Statement was not properly filed/served/posted," "how should a tenant’s security deposit be handled," "can this tenant be evicted," and "what should be done with a tenant’s property after eviction."  I am always happy to add my two cents, as making informed decisions can help a landlord to maximize the value of their property by avoiding costly mistakes.  I thought it might be helpful to cover some (not all) of the basic questions and related topics in a series of blog posts.  First up: pre-tenancy issues.

PRE-TENANCY ISSUES

 

QIs a written lease required to create a landlord-tenant relationship?

 

A:  Although admittedly rare, an oral “lease” for residential space can be enforceable if it satisfies basic contractual requirements, e.g., offer, acceptance, consideration.  As such, it is important for a landlord to be careful when talking with a prospective tenant and accepting deposits.  When “oral lease” cases make it to court, the court looks to the intent and actions of the parties.  (Keep in mind that one party’s occupancy of real estate owned by another usually but not always creates a landlord-tenant relationship, e.g., sale/lease-back may not qualify as landlord-tenant relationship.)  Needless to say, a written lease is preferable and highly recommended.

 

Q:  Does a landlord have an obligation to accept an applicant as a tenant?  In other words, is a landlord forced to accept an applicant who just doesn’t “feel” right?

 

A:  A landlord in New Jersey may be as discerning as it wishes when selecting tenants, as long as it does not discriminate based on "race, creed [religious beliefs], color, national origin, ancestry, sex, marital status, domestic partnership status, familial status [children], affectional or sexual orientation, mental and physical disability, nationality, or source of lawful income," according to New Jersey’s Law Against Discrimination.  Interestingly, a landlord can screen tenants based on income-levels, but cannot deny tenancy based on the source of the lawful income, e.g., Section 8 assistance.  Landlords can and should do background checks and screen for creditworthiness, as long as it is done consistently to all applicants and not as a pretext to deny tenancy based on a discriminatory basis.

 

QUnder New Jersey law, is there any information that must be provided to a tenant and what happens if it is not provided?

 

ANew Jersey statutes require a landlord to provide the following information/notice to a tenant at or around the start of the tenancy:

 

  • Under N.J.S.A. 46:8-19, a landlord must provide certain information concerning how and where a tenant’s security deposit is being held within 30 days of receiving the deposit. [New Jersey’s Security Deposit Act will be discussed in greater detail during the next post in this series.]
  • Under N.J.S.A. 46:8-28, except for 2-unit/owner-occupied rental properties, a landlord is required to file with either the local municipality (1-unit; 2-unit/non-owner occupied) or the Department of Community Affairs (all other cases) what is commonly referred to as a Landlord Registration Statement (a/k/a a Landlord Identity Statement), which generally identifies the owner of the premises, the owner’s local agent, a maintenance contact, an emergency contact, and those holding mortgages on the premises.  Under N.J.S.A. 46: 8-29, a copy of the Statement must be provided to a tenant at time of each new tenancy.
  • Under N.J.S.A. 46:8-39, a landlord with 10 or more units is obligated to provide a tenant with information regarding the availability of crime insurance and the location of applications for same within 30 days of occupancy.
  • Under N.J.S.A. 46:8-46, a landlord with more than 3 units available must provide a tenant at time of occupancy with a copy of the “Truth in Renting” booklet from the Department of Community Affairs, which generally sets forth the legal rights and responsibilities of tenants and landlords in New Jersey.

Under New Jersey’s Security Deposit Act, failure to provide the required notice in a timely manner enables a tenant to make written application for the security deposit (and interest) to be applied on account of rent due and the landlord cannot demand any additional security deposit.  Failure to provide the notice required under the remaining 3 statutes could subject a landlord to liability for civil penalties under New Jersey’s Penalty Enforcement Law as follows: $500.00 (Landlord Registration Statement), $200.00 (notice of crime insurance), and $100.00 (Truth in Renting booklet).  In addition, a landlord will not be entitled to a judgment for possession against a tenant unless/until the Landlord Registration Statement is filed/served/posted.

The next post in this series will discuss a landlord’s obligations under New Jersey’s Security Deposit Act.

We welcome all NJ "tenancy" questions!

Round-Up: Multifamily Insiders

If you own or manage apartments in South Jersey, I encourage you to check out Multifamily Insiders, which is a site dedicated to the Apartment Industry.  There are a variety of resources on the site, including job and vendor listings as well as blogs and discussion threads.  I seem to always find some useful/interesting information + there is a real sense of "community" building on the site.  (Full disclosure: I have signed up to be a member of Multifamily Insiders but have no ownership interest or other financial interest in it and absolutely no involvement in running it.  I just find it to be a useful site.)

Anyway, I wanted to pass along some recent blog posts from Multifamily Insiders which I thought you might find useful/interesting:

  • Pablo Paz, National Safety and Maintenance Instructor for NAA Education Institute, warns that apartment properties will be subject to the EPA's new Lead-Based Paint Renovation, Repair and Painting (RRP) Rule which takes effect April 22, 2010.  For those unaware, among other things, the new Rule requires employees and contractors who perform any renovations, repairs, and painting in homes built before 1978 to be certified by an EPA-accredited training provider as to regulations and guidelines on how to work safely with lead-based painted surfaces.  The training has to be completed by the April 22/2010 deadline.  The post includes useful links to further information from the NAAEI and the EPA about the Rule and compliance.
  • Brent Williams has an excellent series of posts about the ugly, the bad, and the good (somewhat) that he was subjected to during the lease renewal process at his apartment complex.  The posts contain excellent analysis and food for thought for all managers or owners.  MORAL OF THE STORY: customer service and attention to detail add value to a property and are worth the effort.
  • On the topic of customer service, Eric Brown of the Urbane Lab has an excellent post on what he calls "Partnership Marketing" which, in this case, involves working w/ several businesses -- including local restaurants -- to provide custom shuttle service to residents at no cost to the property!  (You may recall Eric Brown/Urbane Apartments from an earlier post on marketing via social media.)  The free bus service clearly adds value to the property and it sounds like a real "win-win" for all involved.  What kind of "Partnership Marketing" opportunities might be available to your properties that would help add value?

Is a Rental Renaissance Coming?

Here's a post by Dee Allomong of Let's Talk Property Management about the onset of a possible "rental renaissance" tied to the impending reset of option-ARM mortgages in the U.S.  (Full disclosure: I am a member of Let's Talk Property Management but have no ownership interest in it and absolutely no involvement in running it.  I find it to be a useful site.) 

If Dee is right, and I think she is, the renaissance will be led by those suddenly finding themselves in the "sell to rent" group.  Check out the graph in Rental Housing and Real Estate Market Trends for 2010 from PropertyManager.com, to which Dee also links.  There is a mountain of option-ARM mortgages still to reset and we might not get to the other side until 2013.

So, we should expect a significant increase in the tenant pool, but is that a good thing for managers of multi-family properties?  I'm not so sure.  On the one hand, more tenants should eventually equal more demand, which is a good thing.  On the other hand, won't many of the "sell to rent" group look for residential to rent first?  Furthermore, won't there by credit issues?

The key to creating value from the "sell to rent" group will be found in screening and marketing.  If you are a multi-family property manager, when is the last time your screening procedures were reviewed and updated?  Are you able to identify the credit risks and proceed accordingly?  Similarly, are you able to identify the cream of the crop from the "sell to rent" group?  If so, what are the demographics and how can you reach them?

If anybody out there has reliable demographics on the "sell to rent" group and any experience in trying to reach it, please drop me a line.