Articles Posted in Real Estate

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burnt_building.jpgWe recently learned of the case of an Essex County man who has repeatedly delayed evictions through various techniques. The most common technique involved the practice of causing substantial damages to his rented dwelling, and then reporting the damages to code enforcement, under the misrepresentation that the damages were either present when he took possession, or became present by reasons other than his own malfeasance. Under recent amendments to New Jersey’s Forcible Entry and Detainer Act, it is a Disorderly Persons offense for a tenant who is facing eviction to vandalize his apartment. Nevertheless, it is very often the landlords who are brought before Municipal Court Judges to try to explain why they rented an apartment with numerous habitability defects.

Several years ago, when I was working as a property manager, I encountered a similar situation with a tenant who moved in to one of the buildings I was managing, and promptly proceeded to remove the strike plate from his front door entry. He then called Code Enforcement to advise that office that I had rented an apartment that was not secure. Code Enforcement then called me and told me that I would be fined if I did not immediately fix the apartment. I then conducted some further research and contacted a previous landlord of this particular tenant. Needless to say, that landlord had some choice words to say about the tenant to who I had rented one of my apartments.

The lesson I quickly learned is to get the complete history of all tenants before renting to them. There are several sources for this information, including interviewing the prior landlords, as well as various internet based companies that will inform you of an applicant’s eviction history for a very modest price. In the case of the Essex County man, who has already cost several landlords thousands of dollars, some landlords have reported that they “inherited” the tenant when they purchased the property from a prior landlord. In these cases, proper due diligence would require conducting a background search on every tenant residing in a property before closing. The lesson in that case is “when buying an investment property, make sure you know what you are investing in.” For the landlords who have already fallen victim to this scam, it is a difficult lesson to learn. For the rest of us, it serves as a reminder to make sure we know who we are renting to, before we sign our contract.

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Keys.jpgAnyone who has been to Landlord Tenant Court during the last ten years has heard the pre-calendar instructions, and by now, may even have those instructions memorized. Each time, when the Judge gets to the part that states “a Landlord may not lock out a tenant by himself or herself,” most of us have wondered, at some point, what kind of landlord would attempt to do such a thing. Perhaps even more important, is the question of what would be the consequences if a Landlord were to illegally lock out a tenant? During the past several weeks, an alarming number of commercial tenants have come to our office with complaints that their landlords have threatened to lock them out. In an effort to answer some of their questions, we have compiled some of the key points in the law.

Under N.J.S.A. 2A:39-1, a landlord who illegally locks out a tenant may be subject to both civil and criminal penalties. As far as the civil penalties go, the landlord may need to reimburse the tenant for up to three times the monthly rent and all damages proximately caused including attorney’s fees. The criminal penalties, which were recently added to the Statute, include a charge of disorderly persons for anyone either performing the illegal lockout or owning the property where the illegal lockout was performed. As an ancillary matter, landlords should keep in mind the fact that shutting off any utility which the tenant has been receiving is considered to be tantamount to an illegal lockout under the law.

The immediate concern of tenants who are illegally locked out is getting back possession of the dwelling. This is done by filing an emergent application, known as an Order to Show Cause, with the Court. The fee for this application is $50 and the Court will take all steps necessary to try to ensure that the tenant’s application can be heard on the day it is filed. Since there is a significant chance that the landlord will not be available to appear that day in Court, on such short notice, to give the Court his or her argument, the Judge will usually sign a temporary order at the time of the tenant’s appearance, allowing the tenant back into the premises, but also setting up a “return date,” usually 3 to 5 later, when the landlord and tenant can both attend to argue whether or not the tenant should be permanently allowed back into the premises. Any argument regarding financial losses will usually be saved for a later date when a proper trial can be held.

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Calendar.jpgThe Current Problem

Each year, New Jersey municipalities have suffered substantial shortfalls as the result of Tax Appeals being filed after the municipal budgets have been adopted. Under the current law, each municipality must adopt its budget by March 31 and the deadline to file a tax appeal is generally April 1. In some cases, tax appeals do not get heard until several months after they are filed. The judgments resulting from those Tax Appeal applications are then mailed out several weeks later. The result for most municipalities is a major budget shortfall. Furthermore, the school system, which usually accounts for the majority of a municipal budget, is not bound to return any of the funds previously guaranteed under the March 31 budget.

The solution that many municipalities have employed is the same solution that any governmental entity employs when it has a budget shortfall. They have sold bonds, which they must pay back with interest at a later date. This solution, however, only forestalls the impact of the tax appeals. Another solution, employed by assessors is to offer to settle a matter with the stipulation that the lower assessment will not become effective until the following year. This solution allows a municipality to account for an adjustment in some of their line items prior to a budget being adopted. Nevertheless, this solution is used relatively rarely, and can only be used for settled matters.

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According to some experts, New Jersey’s real estate market reached its peak in the summer of 2006. Since then, real estate values have consistently dropped. Among the properties that have seen the most dramatic decreases in values are New Jersey apartment buildings. As the real estate values have continued to plummet, tax assessors have scrambled to try to ensure that their assessments do not exceed the values. In some cases when a reassessment or revaluation has not been performed to reflect the diminution in values, owners of apartment buildings have enjoyed success in their tax appeals.

While apartment buildings were historically valued based upon the income streams that investors could expect to receive, the prospect of condominium conversions from 2003 through 2008 forced apartment building values to increase far beyond what could normally be justified if the investor were only looking at rental income. In fact, in many cases, the expenses for the recently sold buildings far exceeded the rent rolls. The belief among investors was that their profits would be realized once the buildings were converted into condominiums and their units were sold off to individual owners. When these prospects did not come to fruition, the unfortunate result was a high inventory of vacant condominium and apartment units and a substantial depreciation in residential rents. These factors have all contributed to a decrease in the values of apartment buildings, and an increased number of tax appeals.

To further complicate matters, New Jersey municipalities that conducted their most recent revaluations or re-assessments at or near the height of the real estate market are now substantially over-assessed for most properties. In these instances, filing a Tax Appeal is essential. However, in some towns, properties are valued at as little as 20% of their true value. The reason for this is that conducting revaluations or re-assessments is an expensive process for municipalities to undertake. Some towns have not conducted revaluations in several years. Those under-assessed municipalities will therefore operate under the sometimes faulty assumption that all of their properties are under assessed by the same ratio and will increase their tax rates accordingly.

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In recent months, Tenancy Courts have begun seeing an increasing number of eviction actions based upon the claim of “Habitual Late Payment of Rent.” While the Statute addressing this issue, N.J.S.A. 2A:18-61.1(j), was clear in its intent, recent case law has added to the requirements originally contemplated by the Statute. In addition, some case law has even suggested that the issue of non-payment of rent is not even an issue of law, but rather an issue of fact. In this week’s article we will discuss the most recent mandates for landlords seeking to evict a tenant for Habitual Late Payment of Rent.

Notice to Cease

The Notice to Cease is a required notice in for certain grounds for eviction under New Jersey landlord tenant law. It is a warning notice, which advises the tenant that he or she is doing something wrong and that an eviction will be filed unless the wrongful action ceases. Actions for Habitual Late Payment require this Notice. However, in recognition of the fact that very often the late payments by the tenants are not consecutive, and in fact sometimes there will be several “on-time” payments in between the late payments, recent case law suggests that two Notices to Cease are required for this ground. The first Notice to Cease can be sent as early as the second late payment. In the event that the tenant is late a third time, a second Notice to Cease should be served.

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New Jersey’s Landlord Tenantapt.jpg rules are overdue for a major overhaul. Many of the laws concerning landlord tenant relationships have evolved over the course of several hundred years. The resulting tenancy law has been a compilation of a myriad of Statutes, Court Rules and Administrative Codes, many of which are ambiguous, antiquated, or simply conflicting with each other.

A proposed new proposed Statute, entitled N.J.S.A. 46A, has been drafted to replace existing Landlord Tenant Laws. While the legislature has not yet adopted the proposal, it is expected that the newly refined Statute will become law within a few years. It remains uncertain what effect the new Statute will have on the existing case law, much of which is based upon the Court’s interpretation of the prior Statute.

Most of the changes in the proposed are minor corrections, clarifications and reorganizations of the prior law. Added to the revised Statute are various items including a new cause for eviction for tenants who create imminent serious danger to others, the rental property or to the immediate vicinity of the rental premises. The new proposal also includes model forms for various notices that continue to be a prerequesite for all grounds for eviction other than non-payment of rent.

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In the wake of the recent epidemic of beg bug outbreaks in both residential and commercial properties, an increasing number of lawsuits have followed. In this week’s article, we will examine some of the legal issues that may arise during a bed bug suit.

Tenants seeking to bring an action against a landlord due to bed bugs must not only prove that the bed bugs caused an injury, but they must also prove that the landlord was negligent. The matter of Marilyn Mitchell v. Capitol Management Corp (2010)Apt 5.jpg involved a residential tenant who had discovered bed bugs in her apartment. She had contacted the landlord to report the infestation and the landlord responded by having the apartment exterminated that week. The tenant then discarded most of her clothing and furniture in order to ensure that the bed bug problem would not return. The tenant, who was living with her ten year old son, moved to a new location and did not return to the apartment.

In addition to the physical injuries suffered by the tenant, she also claimed that she suffered from post traumatic stress disorder. On Appeal, the tenant argued that the mere existence of bed bugs should create a “presumption of negligence” on the part of the landlord. She further argued that the failure of the landlord to take “aggressive measures to eradicate infestation” is also negligence. The Appellate Court disagreed with both of the tenant’s theories, and ruled in favor of the landlord. While the Appellate Division did not question the legitimacy of the injuries allegedly suffered by the tenant, it did not find any evidence to support the notion that the landlord was negligent.

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affordable house.jpgAn increasing number of New Jersey residents have become dependent on affordable housing to be able to continue to live in New Jersey. In the matter of South Burlington County NAACP v. Mount Laurel, 67 N.J. 151 (1975) and later, in the subsequent matter of South Burlington County NAACP v. Mount Laurel, 92 N.J. 158 (1983), the Supreme Court of New Jersey visited the issue of affordable housing. The Court determined that municipalities in “growth areas” have a constitutional responsibility to provide affordable housing to low and moderate income families. Out of these two rulings came a comprehensive set of laws and guidelines aimed at forcing New Jersey municipalities to meet their “fair shares” of affordable housing. To this end, the Council on Affordable Housing (COAH) was established to help oversee the process. At least one New Jersey municipality is now challenging the ruling as it pertains to its own obligation.

The issue began a few months ago when COAH removed Marlboro from its protections after multiple complaints that Marlboro allegedly failed to demonstrate good faith in meeting its fair housing obligations. Subsequently, four developers brought suit against Marlboro in attempt to force it to allow additional affordable housing. With the costs of real estate construction continuing to increase, and the values of real estate continuing to decrease, Marlboro may be only one of several towns that will eventually be targeted by opportunistic developers seeking to exploit the COAH rulings for their benefit. In the meantime, Marlboro is appealing the COAH decision to remove its protections.

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New Jersey tenants who can prove that their residences are not habitable may be able to terminate their leases without consequence under a procedure known as a “constructive eviction.” In this week’s article, we will discuss some of the practical considerations for tenants choosing to elect this remedy.

In a previous article, we discussed Marini defenses available to tenants who are experiencing habitability problems which do not necessarily render their dwellings completely uninhabitable. In more severe cases, it may become necessary for the tenant to permanently vacate the dwelling, by claiming a “constructive eviction.” The matter of Reste Realty v. Cooper, 251 A.2d 268 (1969) involved a commercial tenant who was experiencing chronic and persistent flooding. The landlord argued that since there was no written covenant of habitability, that the tenant assumed the full risk for any loss of use of the premises. The Court ruled in favor of the tenant, citing the theory that it is the duty of the landlord to alert the tenant to any hidden or latent defects of which the landlord is aware and of which the tenant may not easily discover.

Recently, the Court has applied the theory of constructive eviction to a complaint for mold. In the recent matter of Marusiak v. McCall, the Tenant claimed that she was forced to move from her residential dwelling due to mold. The landlord refused to return the tenant’s security deposit, claiming that it was being withheld due to unpaid rent for the time period after the Defendant vacated the premises. The tenant brought suit against the landlord claiming that she was constructively evicted, thus terminating her duty to pay rent, and further requiring the landlord to return the security deposit back to her. The Court agreed with the tenant and awarded her with the return of her security as well as damages under the Rent Security Deposit Act.

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Following the eviction of a tenant, landlords often ask what should be done with the tenant’s belongings. In this week’s article, we will discuss the law regarding Abandoned property.

Notice
New Jersey’s Abandoned Property Act sets forth guidelines for landlords and tenants in handling the issue of Abandoned Belongings. Under the Act, before discarding any of the tenant’s belongings, a landlord must provide a former tenant with 30 days written notice of the tenant’s right to claim the belongings. The Notice should be sent via certified mail to the tenant’s last known address, which is sometimes the address that the tenant just vacated. It is important to note that the landlord does not need to prove that the tenant actually received the Notice. Since the tenant has the option of having his mail forwarded, the law does not place the burden upon the landlord to try to figure out the tenant’s new address.

Storage
After providing the tenant with notice of his or her right to claim any belongings, the landlord must not discard the belongings until after the 30 day notice period has lapsed. In some cases, landlords may choose to leave the belongings in the rented premises. In other cases, where leaving the belongings in the dwelling is not practical, the landlord may, at his discretion, transport the belongings to another location. If the landlord is charged a fee for storage, the landlord has the right to ask the tenant to pay that fee, provided it is reasonable.

Consequences of Failing to Comply
As much as the Abandoned Property Act protects tenants from having their belongings discarded, the Act also protects landlords from tenants who may try to make a claim for their belongings after the 30 day reclamation period has lapsed. Landlords who choose to not comply with this Act, and either fail to serve a Notice, or discard their tenants belongings in sooner than 30 days are taking a calculated risk that may backfire, if the tenant later decides to sue for the value of his discarded belongings.

Consequences of Orderly Removal
Under the New Jersey Court Rules, a tenant who is facing a lockout following an eviction action may apply to the Court for an extra week to remain in the premises and remove his belongings. This procedure is commonly known as an “Application for Orderly Removal.” Traditionally, Judges have included language in the Order for Orderly Removal, setting forth that any belongings left in the rented premises will be considered abandoned. However, not all Judges include this provision, so it is best to check the Order to be sure.
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