Articles Posted in Real Estate

The prohibition against double jeopardy, which precludes a person from being tried twice for the same crime, has an equivalent in the civil courts. The concept of Res Judicata stands for the principle that a person cannot be sued twice for the same dispute. However, similar to the prohibition against double jeopardy, Res Judicata is not without exceptions. One such exception involves actions in New Jersey’s Landlord Tenant Courts. The Landlord Tenant Courts in New Jersey are Courts of extremely limited jurisdiction. More specifically, the only issue that can be resolved in a proceeding in Landlord Tenant Court is whether or not the tenant is to be evicted. All other issues must be adjudicated separately in different venues. This duality has led to multiple Court decisions limiting the bar against subsequent actions, even in cases where both actions are adjudicated in Landlord Tenant Court.

Generally, the Courts have ruled that a landlord tenant proceeding will not bar subsequent actions involving the same parties in cases where the relief sought is different than the original action. However, in light of this fact, we were left uncertain as to how the Court would rule in a case where a landlord brought a nearly identical action twice against the same tenant. We recently had an opportunity to test the limits of Res Judicata in landlord tenant actions.

The facts of the matter were quite simple. The allegation was that the tenant had caused purposeful or grossly negligent destruction to the rented premises. To support this claim, the landlord produced a long list of damages she claimed the tenant or his guest had caused. Under the law, evictions for grossly negligent destruction to a residential dwelling can be filed upon 3 day’s advance notice to the tenant. In the past, our firm has been successful at evicting several tenants under this cause. The problem in the pending case, however, was that the landlord had already unsuccessfully tried this matter with a previous attorney. The landlord then came to our firm to see if she could obtain a different result.

We started our action by changing the premise upon which the eviction was sought. While the original action had argued simply that the tenant had damaged the premises, our action argued that the tenant violated the written lease by failing to pay for the damages. Under New Jersey’s eviction law, a residential tenant can also be evicted for violations of the landlord’s rules and regulations; however, the requisite Notice periods required for this cause are quite onerous.

The Defendant’s attorney argued that our action was really a disguised version of the original action. I argued that the cause of action was substantially different and that Res Judicata should not apply in either case. After a few hours of arguments, the Court recessed for lunch, while the parties continued to discuss possible settlement options. Unfortunately, the matter eventually settled, and we were left with no indication as to how the Court would rule upon such an issue.
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According to a recent report in Newark’s Star Ledger, the average rent for a New Jersey 2- bedroom apartment is $1302 per month.* However, for thousands of landlords who are not being paid their rent on time, the statistic translates to more than $40 per day of lost rental income. In many cases, having a few tenants who are not paying rent results in a major financial loss for landlords.

In 1947, in an effort to lend efficiency to the eviction process, the State of New Jersey created a “Summary Proceeding” to handle eviction actions. Although, the process has undergone several statutory and regulatory changes since then, the concept of allowing New Jersey landlords a method to quickly remove tenants has remained unchanged. Today, landlords can typically expect that an eviction action will be scheduled for trial about 1 month from the date of filing, and that a tenant can be removed within about 2 weeks from the day a Warrant of Removal is ordered.

The Summary Proceeding is much faster than a typical ejectment action, thus preventing landlords from losing valuable time in replacing a non-paying tenant. There is, however, an inherent limitation in the Summary Proceeding. Because tenants are sometimes served with a copy of the Tenancy Summons as little as ten days before trial, requests for Discovery and the filing of Counterclaims are not permitted. While the tenant may assert a claim against the landlord on the day of Court that would constitute an equitable defense to the underlying claim for eviction, tenants in an eviction proceeding may not assert any Counterclaims for damages against the landlord. Therefore, tenants who wish to bring a claim against the landlord will often need to either have the tenancy matter transferred are file a separate action against the landlord in another division of the Court.

In 1996, in an effort to solve an epidemic of rampant drug use in publicly assisted housing, President Clinton announced a “one strike and you’re out” initiative for Section 8 and public housing projects. The new guidelines included more comprehensive screening and stricter eviction policies relating to drug use and criminal conduct. Under the “one strike and you’re out” policy, public housing authorities are allowed to refuse admission to any household who has been evicted from public or Section 8 housing. In the matter of Department of Housing and Urban Development v. Rucker, 535 U.S. 125 (2002), the United States Supreme Court affirmed the right of public housing authorities, to evict entire public housing households whenever any member of the household, or any household guest, engages in drug-related or certain other criminal activity.

Notwithstanding the Rucker ruling, in the recent matter of Newark Housing Authority v. Martinez-Vega, Docket Number ESX-LT-20023-11, New Jersey Superior Court Judge Mahlon Fast placed some limitations on the powers given to housing authorities. Judge Fast, whose name many may recognize as being the long time authority in the area landlord tenant law, ruled that the Newark Housing Authority had exceeded its powers in attempting to evict a tenant whose visiting son had been arrested at the apartment for gun and drug possession. In so ruling, Judge Fast indicated that a tenant should not be automatically penalized for the actions of a non-resident family member.

The decision by Judge Fast is, in fact, consistent with the decision Appellate Court’s decision in the matter of Oakwood Plaza Apartments v. Smith, 352 N.J. Super. 467 (2002). In that matter, the Court ruled that eviction actions from federally subsidized housing projects cannot be arbitrary or capricious and that it is the duty of the courts to ensure that landlords exercise discretion in properly weighing the salient factors.

In the week between Christmas and New Year’s Day, when landlords have historically encountered the most difficulty finding tenants to fill their vacancies, the issue of rent loss is once again in the forefront of our discussion on maximizing revenues for all the landlords we represent. In 2007, we saw a surge of buildings being sold and converted to condominiums. Unfortunately, in many cases, their developers have been unable to sell those condominiums. To make matters worse, the bad economic conditions and failing job market have forced younger rental prospects to continue to live with their parents, and older prospects to either downsize, move in with roommates, or to simply move out of New Jersey. The result is a high number of vacancies and few tenants to fill them. Landlords who are used to pre-screening their tenants for credit problems and eviction history may no longer have that luxury. Higher than ever vacancy rates have forced landlords to either rent to a high risk tenant face the proposition of leaving the apartment vacant. But perhaps there is another option that has been overlooked.

In a recent event our office sponsored, we met a gentleman with a rather unique business. He insures risky tenants. When a tenant with a less than perfect credit rating or eviction history wants to get an apartment, and landlords do not want to take the risk, the tenant can pay the business a rather modest fee to essentially write an insurance policy. In the event that the tenant default s in the lease, the landlord still gets paid, and therefore has not assumed any risk. The company calling themselves “Insurent” has insured thousands of tenants throughout New York State and is now in the process of expanding their practice into New Jersey. Offering a variety of services focused on securing the performance of tenants, Insurent enables landlords to keep their buildings full, while also guaranteeing that the landlord will not take the risk.

Finally, with the increase in the number of companies now offering rental insurance services, landlords who avail themselves of rent guaranteeing services must remember to use extra caution to ensure that they continue to employ the same uniform standards for acceptance of all applicants. Historically, income, credit worthiness, eviction history and criminal background have been the four major factors in determining whether to accept or reject a tenant. Landlords who now choose to use rental insurance programs, will now be faced with the increased challenge of developing standards that will keep them protected from discrimination claims.

The recent downturn in the economy has substantially impacted the business of residential rentals. As tenants continue to struggle to pay their rents on time, they also continue to incur late fees, thus further depleting their limited resources. The question then becomes whether late fees are allowed, and if so, how much of a late fee can be charged?

When Can the Late Fee be Charged?

In a standard non-payment of rent eviction case, it is clear that the Court’s jurisdiction is limited strictly to the issue of rents. It is therefore necessary for a landlord seeking a late fee as part an eviction mater to demonstrate that there is a written lease setting forth that late fees are “additional rent.” In cases where there is no written lease, or in cases where the written lease does not use the term “additional rent,” the late fee cannot be included as part of the balance that the tenant must pay in order to avoid eviction. It should also be noted that even when there is a written leases calling late fees “additional rent,” the landlord still cannot include that item in cases where the tenant is receiving Federal housing assistance.

Our firm previously reported on the importance of obtaining a Landlord Registration Statement. This time, we are going to discuss the Certificate of Occupancy. Unlike the Landlord Registration Statement, a Certificate of Occupancy is not a requirement for evicting a tenant in New Jersey. The lack of a Certificate of Occupancy may, however, bar recovery of rents in a civil action.

Most towns in New Jersey require a landlord to obtain a new Certificate of Occupancy each and every time a new tenant moves in to a residential dwelling. Some towns even require Certificates of Occupancy for commercial rentals. Inspections requirements for a certificate of occupancy vary greatly by municipality. All towns will check the operation of the smoke detectors, and in cases where there is gas heating, the carbon monoxide detector will also be inspected. Some municipalities will conduct much more thorough examinations, including items that are not even remotely related to safety issues in the rented premises.

While most landlords are familiar with the fines which the town may impose for failing to obtain a certificate of occupancy, few landlords are familiar with the more costly consequences which can result from such failure. In towns where certificates of occupancy are required, a dwelling rented without a certificate of occupancy constitutes an illegal contract. Consequently, in the matter of Khoudary v. Salem Board of Social Services, 260 N.J.S. 79 (App. Div. 1992), the Court ruled that a landlord who rents a dwelling without a certificate of occupancy does not have the right to file a suit for rents.

Since 2002, the Law Office of Michael D. Mirne, L.L.C. has filed several thousand eviction complaints in 13 different counties throughout New Jersey. Each week, a few landlords ask us whether they need to be present on the day of Court. While the question may sound simple, the answer is sometimes more complicated.

Defaults

The vast majority of all evictions filed in New Jersey are based upon non-payment of rent. Over 1/3 of evictions based upon nonpayment of rent result in Defaults. These are matters in which the tenant fails to appear for Court, and a Judgment for Possession is issued. The remainder of cases, in which both parties appear at Court, are then marked “Ready.” These matters are, in most counties, mediated by either the parties on their own, or by an employee of the Court, skilled at bringing the matter to a fast resolution without trial. Based on our experience, only about 5% of non-payment of rent cases remain unsettled after mediation and must proceed to trial.