The sudden loss of jobs has resulted in a downturn in the economy throughout Monmouth County. Some of the towns that bordered or neighbored Fort Monmouth have felt the most serious impact. In particular, Eatontown, Oceanport, Tinton Falls, Shrewsbury and West Long Branch have seen major downturns in their housing markets. As with all deflationary markets, some of the diminution in value is directly attributable to the loss of demand and some of the deflation is attributable to a distorted the supply and demand quotient created by a surplus of sellers and a deficiency of buyers amidst concerns that the area will not make a speedy recovery.

The unfortunate result is that some towns, like Shrewsbury and West Long Branch, are now assessed at more than 100% of value. Other over-assessed towns in Monmouth County include Brielle, Englishtown, Farmingdale, Loch Arbour, and Red Bank. While assessors strive to create assessment models that will minimize their coefficients of deviation, it is an inevitability of basic arithmetic that a ratio of greater than 100% must yield several line items that are over-assessed. During the course of the past 5 years, during the downturn of the real estate market, towns have raced against time to perform re-assessments or revaluations to avoid this problem. Not coincidentally, during this same time period, our firm has enjoyed great success at reducing the assessments for several hundred taxpayers in towns whose assessments have not kept pace with the deflation of the market.

If you have a question about tax appeals, please call our office. Please also remember that in most cases, the deadline to file your Tax Appeal is April 1.

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 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.

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.

Is there a limit to the Late Fee?
With regard to limitations on late fees, there is apparently a difference of opinion among Judges. Several Court decisions have held that a late fee should not be punitive and must reflect the actual "administrative expense" that the creditor incurs in processing the late payment. In the matter of Kuhn v. Hopkins, A-4507-96T1 (App. Div. 1998), the Court ruled that a late fee would not be enforceable if it exceeded the landlord's actual damages caused by the late payment. To this end, some Judges have enforced a 5% limitation on late fees.

Mandatory Grace Period
Most leases provide for a grace period before a late fee can be imposed. However, even in cases where the lease does not provide for a grace period, N.J.S.A. 2A:42-6.1 provides that certain tenants are automatically afforded a 5 business day grace period before a late fee can be imposed. Under N.J.S.A. 2A:42-6.3, those tenants are limited to those individuals receiving:

1. Social Security old age pensions
2. Railroad Retirement Pensions
3. Other governmental pensions in lieu of Social Security Old Age Pensions
4. Social Security Disability Benefits
5. Supplemental Security Income, or
6. Benefits under Work First New Jersey

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.

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.

Non Contested Cases
Out of the 5% of cases that go to trial, some are what we may call "uncontested fact cases." Anyone who has been to landlord tenant Court in the last 10 years is familiar with the instructions that are read prior to the calendar call. In particular is the instruction that states "the Judge has no authority to make the landlord wait for rent or force the landlord to take it in installments." Notwithstanding this instruction, we still see cases in which a tenant who agrees he or she owes money still insists on going to trial in the erroneous belief that the Judge will take the tenant's circumstances into account and grant some leniency. Tenancy Court is somewhat unique in the number of Defendants who go to trial, essentially admitting to all the allegations of the Complaint. Not surprisingly, these cases always result in a Judgment for Possession.

Contested Cases
The presumption among many clients is that an attorney can testify for them so they don't need to be present. Unfortunately, RPC 3.7 specifically excludes a lawyer from giving any testimony in a trial in which he or she is also acting as the attorney for his or her client. Therefore, any contested matter, in which a fact is in dispute, requires the testimony of a witness for the Plaintiff. Usually, the landlord or the property manager is the best witness. But on occasion, other witnesses need to be called to address the issue of the amount of rent that is due.

Notice Cases
While the vast majority of cases heard in Landlord Tenant Court involve the non-payment of rent, other causes for eviction, such as lease violations, damage to the premises, and disorderly conduct occasionally arise. In these types of cases, the Court requires oral testimony from the Plaintiff even in cases when the tenant does not appear in Court to contest the matter. These types of cases are generally referred to as "Notice Cases" and the hearing that follows is called a Proof Hearing. Since testimony is always required for these types of cases, our office will call you to discuss your case at least 10 days prior to trial and we will subpoena any necessary witnesses.

Other municipalities have kept their assessments high, and have then been forced to defend a deluge of tax appeals from property owners and their attorneys. Unfortunately, these towns have relied on various unscrupulous methods to defend otherwise indefensible property tax assessments. One method employed is the use of the "N.U." or "Non-usable" code. Here's how it works:

In most cases, the taxpayer will attempt to prove his assessment is too high by offering evidence of comparable sales. The goal, when choosing a comparable sale, is to pick the properties that are most similar to your property, while also confining your search to sales that occurred soon before October 1 of the pre-tax year, or in some cases, within a month or two after October 1. The other requirement that had been imposed upon the taxpayer is that the sales must be "usable." N.J.A.C. 18:12-1.1 sets forth several categories of sales that may be considered non-usable by the tax assessor. Historically, the designation of non-usable or "NU" meant that the Tax Board or Tax Court did not need to consider the sale reliable in their determination of value of the subject property. The only sales that would be considered would be "arms length sales." With the surge of "distress sales" including foreclosures and short sales, it is becoming increasingly prevalent that the distress sales are defining the market. Put simply, the price that a buyer is willing to pay will be substantially affected by the abundance of bank sales.

For several years, objections to the use of "non-usable" sales have plagued tax appeal practitioners due to this fact that a large number of otherwise perfect sales data were eliminated, based solely on an administrative code. However, earlier this year, we received some great news when the Tax Court decided the Matter of Greenblatt v. Englewood City. In that matter, the Court concluded that "As it is the Defendant [the municipality] that is putting the issue of the reliability of sales [comparables]... it is the Defendant's burden to prove that the sales do not reflect market value. Simply saying that a sale was determined by the assessor to be non-usable for purposes of the Director's sales ratio study does not render the sale non-usable for valuation purposes. One opposing the sale must demonstrate with competent credible evidence that the sale does not reflect true market value." While we have continued to receive objections from Municipal attorneys who disagree with our use of non-usable sales, we now can state with confidence that the municipality that has the burden of proving that these sales do not accurately reflect value.

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.

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.

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.

In cases where your property is located in an under-assessed municipality, you still may have a good case for a Tax Appeal if your "true value assessment" exceeds the value of your property. The True Value Assessment can be easily derived by taking your assessment and dividing it by the equalization ratio for your municipality. Your town's equalization ratio can be obtained by either calling your assessor or the County Board of Taxation. If you feel that your True Value Assessment exceeds the actual value of your property by more than 15%, then a Tax Appeal may be justified.

The tax appeal procedure begins with an application which is generally due on April 1st. Filing fees for the application range between $5 and $150 depending upon the assessed value of the property. In cases where an attorney is retained, the attorney will often handle the appeal on a contingency fee basis. While property owners who are not corporations or limited liability companies may represent themselves in the tax appeal proceeding, the applicant should have an appraiser at the hearing in all cases where a discrepancy in valuation is at issue.

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.

Notice to Quit
In the event that the tenant is late a fourth time, the tenant may be served with a Notice to Quit. The Notice to Quit is the Notice terminating the tenancy, and must give the tenant not less than 1 month from the next rental payment becoming due before the lease is terminated. At the expiration of the time period set forth in the Notice to Quit, an eviction action may be filed.

Recent Case Law
In the matter of Matthew Carter Apartments v. Kathy Richardson, the Appellate Division re-examined the issue of Habitual Late Payment of Rent. In that matter, the Court debated over the issue of whether late payments following the various notices actually constituted cause for eviction under the Statute. It is implausible that the Statute could leave any room for interpretation. However, the Appellate Division noted that, in certain cases, where the rent had been paid on time for several months, it is possible that one more late payment several months later may not constitute Habitual Late Payment, even though the Statute included no indication that such conduct would not constitute Habitual Late Payment of Rent. The Court therefore held that the issue of whether Habitual Late Payment of Rent exists is ultimately a question of fact for the Judge to decide, rather than a question of law, which would only require the necessary late payments in order to prove.

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.

Finally, we regret that the obscure law that enabled us to sue a holdover tenant for double rent, will be replaced with a far more tenant friendly version, which only allows a residential landlord to seek "actual damages" caused by the tenant's willful holdover.

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) 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.