New Jersey Real Estate Attorney Blog
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.
Put simply, the Khoudary Court reiterated the well known concept that it would not help the Plaintiff enforce an illegal contract. In the event that a tenant vacates the dwelling owing rents, either for prior months or months that may become due under the unexpired lease, a landlord may not file an action to collect the rents, and furthermore, may not apply any of the tenant’s security deposit toward these rents. The landlord could, however, still bring an action or withhold security for physical damages, such as destruction of the rented dwelling. While it remains unclear, under the Khoudary decision, whether a Court would allow a tenant to file an action for return of all rents previously paid under the illegal contract; it is likely that most Courts would rule that the tenant should pay some rents for the benefit of the use of the apartment, under principles of quantum meruit.
For many years, Courts had interpreted the decision in Khoudary to mean that failure to obtain a Certificate of Occupancy was a bar to evictions. However, that issue has been since clarified. In the matter of McQueen v. Brown and Cook, 342 NJS 120 (App. Div. 2001), the Court determined that since it is clear that letting a tenant remain in the illegal rental would be contrary to public policy, and since a tenant should not be able to benefit from the illegal contract, a landlord still maintained the right to evict the tenant, even if he or she did not obtain a Certificate of Occupancy.