Landlord-Tenant 101 ~ NJ Law in Review

Landlord/Tenant Law 101

By Bruce Gudin, Esq. Of Levy, Ehrlich & Petriello, P.C.

The following are recurring questions that arise in connection with the daily operations of building ownership and management in New Jersey. It is recommended that landlords have a working knowledge of these issues to avoid potential liability

Question What are a landlord's obligations regarding a tenant's security deposit?

Answer A landlord is barred from taking more than 1 ½ month's rent as security, or advanced rent. N.J.S.A. 46:8-12. "Additional security" for the last month's rent must be included in the calculation of the 1 ½ month's rent. All residential landlords are required to deposit security deposit monies received in an interest bearing account. The type of account depends on the number of rental units being rented by a landlord.

Landlords are also required to give tenants notice, in writing, of the name and address of the bank (or other lending institution) where the security deposit is being held within 30 days of the receipt of the security deposit from the tenant. If the property is an owner-occupied property with not more than two rental units, a tenant must give the landlord thirty (30) days written notice asking that the Security Deposit Act be applied. If a landlord fails to provide such notice, the tenant may give a written notice to the landlord to apply the money deposited by the tenant as security towards rent payments which are due or which will become due in the future. The tenant is then without obligation to pay any future security deposit to the landlord, and the landlord is not entitled to make any further demand for a security deposit.

After a tenant vacates rented property, the landlord must, within thirty days of that departure, return the deposit or provide a written statement as to the disposition of the deposit, and serve same upon the tenant either by personal service or by certified mail. The disposition letter must itemize the total amount of the security deposit, plus interests accrued on that deposit during the lease term, and then itemize each deduction from the security deposit, if any. If the landlord does not return money owed to the tenant within those thirty days, or wrongfully withholds all or a portion of the security deposit, or fails to send a security disposition letter, the tenant can sue the landlord for double the wrongfully withheld security deposit. Attorneys' fees may also be recovered at the discretion of the court if the tenant is successful.

Q. When can a tenant withhold rents pending repairs by a landlord, or in the alternative, deduct the costs of such repairs from the rent?

A. A landlord warrants to the tenant that the leased property is habitable. This is known as the implied warrant of habitability. This warranty is not against all inconveniences or discomforts. A claimed defect must directly affect the tenant's ability to occupy the demised (rented) premises. Transitory failures generally do not constitute a breach of this warranty. Courts have found that the breach must be so substantial as to amount to a constructive eviction. This means that the problem must be so bad that the tenant cannot continue to occupy the space and would have to leave unless the repairs were made. Recently, judges hearing habitability cases, (as they are known), have been leaning away from a strict interpretation of the case law and have been giving tenants credit in the form of rent abatements for claimed defects that ordinarily may be perceived as trivial.

There are four options available to a tenant claiming that their Warranty of Habitability has been breached:

They could:

(i) declare that they have been constructively evicted and leave the premises;
(ii) repair the defect on the premises after giving the landlord a reasonable opportunity to do so and deduct the costs for repair from their rent;
(iii) withhold the rent until the landlord effects the repairs; or
(iv) make the repairs and proceed with suit against the landlord to collect the costs of same.

If the tenant determines that there is a problem that amounts to a breach of the implied warranty of habitability, the tenant should notify the landlord in writing of the problem and allow a reasonable period of time for the landlord to make the repairs.

Most often, tenants withhold the rent during the time they are claiming a defect on the premises. Landlords then proceed to file an action with the Superior Court, landlord/tenant division, for "non-payment" of rent seeking to dispossess the tenant and recover the premises. Upon the filing of the eviction action, the court will set a trial date. If the tenant wishes to be heard on the issue of habitability, the Court usually sets the matter down for a new hearing date, requires that the tenant place the rent due into a court escrow account, and gives the landlord an opportunity to fix the problems with the unit. The tenant will then have an opportunity to prove to a judge that the claimed defects breach the warranty. Examples of defects that effect habitability are: lack of heat or hot water, defective appliances, plumbing fixtures or electrical outlets, and defective doors, locks or closing devices.

On the new trial date, if the judge agrees with the tenant that there has been a breach of the warranty of habitability, the judge will grant an abatement of the rent. This constitutes the difference between the reasonable rental value of the unit in its defective condition and the agreed upon rent. This may be determined on a percentage basis without expert testimony.

Q: What happens when a tenant breaks their lease by vacating prior to the scheduled end of the stated rental term?

A. When a tenant signs a lease for a rental property, they are agreeing to be responsible for rental payments during the complete term of that lease.

If a tenant must vacate rented premises prior to the termination date in a lease, the tenant should be obligated by the terms of the lease to provide the landlord with written notice of premature termination as far in advance of the departure date as possible. This would give the landlord the greatest opportunity to re-rent the premises, which they are obligated to do as quickly as possible. No matter when notice is given by the tenant, the responsibility to pay rent under the lease does not stop.

The tenant remains responsible for payment of rent until the end of the lease term or the re-rental of the premises, whichever comes first. The landlord is said to have "a duty to mitigate" damages and to make every reasonable effort to re-rent the premises as quickly as possible.

Q: What are some common grounds for eviction in New Jersey other than non-payment of rent?

- Disorderly tenant. A landlord may bring an action to evict a tenant who is disorderly if such conduct disturbs the peace and quiet enjoyment of other tenants. When the conduct consists of noise, it must be repetitious and excessive. In other words, it must be disorderly to a person of "normal" sensitivities. In order to evict on these grounds, the landlord must first issue a notice to cease, which is a written statement to the tenant demanding that they cease the disorderly conduct. If the disorderly conduct continues after the notice to cease, the landlord may then issue a notice to quit with a demand for possession, which is a written document served upon the tenant indicating that the landlord is terminating the tenancy as of a particular date. In the case of a disorderly tenant, the landlord must wait at least three days after issuing the notice to quit before an eviction action can be brought. At trial the neighbors that are "aggrieved" by the recalcitrant tenant's conduct should appear in court to testify on the landlord's behalf.

- Willful or grossly negligent damage to the premises. A landlord can bring an action to evict a tenant who willfully or through gross negligence causes or allows damage to the rental premises. This does not require a notice to cease but does require a written notice to quit with a three-day waiting period before an eviction action can be brought.

- Violation of the rules and regulations of the landlord and/or violation of lease covenants. The landlord can bring an action to evict a tenant for a substantial violation of reasonable rules and regulations of the landlord or for substantial violations of covenants in the lease. A notice to cease is required, along with a notice to quit. There is a one month waiting period from the service of the notice to quit before a Summons and Complaint for eviction can be filed. The violation of the rules and regulations or lease covenants must be substantial, the rules must be reasonable, and the tenant must have accepted them in writing at the commencement of the lease, or as a part of the lease. For breach of a lease covenant, the lease must "reserve the right of re-entry" for that breach. What this means is that the lease itself must contain language allowing the landlord to retake possession of the rental premises for the violation of these rules, rather than simply suing the tenant for damages that flow from that breach.

- Failure to pay rent after an increase. The landlord can bring an action to evict a tenant for failure to pay rent after a notice of increase. No notice to cease or notice to quit is required. However, when the rent is increased in a month-to-month tenancy, the landlord must serve a one-month notice to quit and terminate the old tenancy while offering a new tenancy stating the increased rent. This, however, does not give the landlord unbridled discretion to make unconscionable increases in the rent. Increases must be reasonable, which means it would be acceptable to a fair and honest person and not be " shocking to the conscience."

- Habitual late payment of rent. The landlord can bring an action to evict a tenant for habitual late payment of rent. A notice to cease and a one month notice to quit are both required. Cases in New Jersey have held that a finding of habitual late payments of rent requires at least two late payments following the notice to cease (there is no case law indicating how many payments must be late before the notice to cease is served).

- Personal occupancy by owner or purchaser of unit. Owners of three cooperative or condominium units or less or the owner who occupies a building of three residential units or less may bring an action to evict a tenant if the "target" unit is to be personally occupied by the owner or buyer of the unit. The owner himself must seek to occupy the residential unit personally or have contracted to sell it to a buyer who wishes to occupy the premises personally (and the agreement of sale calls for the unit to be vacant at the time of closing). In this instance, the landlord must serve a two month notice to quit.

- Occupancy as consideration of employment. Many times people will be offered a unit "rent free" as a benefit of employment by the owner. This only applies when the tenant became an employee simultaneous to or before becoming a tenant. Under these circumstances, a landlord need only serve a three day notice to quit terminating the tenancy and demanding possession. Where an existing tenant becomes an employee of the owner, they must be given an opportunity to continue in possession under a lease for payment of rent..

Bruce E. Gudin, Esq. is a Partner with the firm of Levy, Ehrlich & Petriello, P.C. headquartered in Newark, New Jersey. He can be reached at (973) 643-0040, ext. 104 or by e-mail at Bruce@LEP-lawyers.com.

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© 2000 by Bruce E. Gudin.

The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.