New Jersey: Collection Practice and Procedure for Claims against Past Tenants (part 1)

In this multi-part article, we will discuss various aspects of collection practice for Landlords who are owed rents from prior tenants.

The vast majority of New Jersey eviction actions are filed for non-payment of rent. Evictions based upon other causes comprise less than 10% of all filings. Our office is frequently asked questions about collecting unpaid balances from prior tenants after they are evicted. Very often, landlords who are unfamiliar with the process begin with a mistaken belief that the result they obtained in Landlord Tenant Court will entitle them to “money judgments” against their tenants. Unfortunately, judgments issued by the New Jersey Landlord Tenant Courts are for “possession” only. This Judgment is the order giving the landlord the right to have the tenant locked out with the aid of a Special Civil Part Officer. While the Landlord Tenant Court will generally require that the tenant pay all past due rent in order to avoid eviction, the Landlord Tenant Court cannot compel a tenant, who is vacating the premises, to pay any money. Therefore, landlords who choose to seek outstanding balances from their prior tenants are therefore forced to file a separate action for the collection.

Most claims for rent against prior tenants are filed in the Special Civil Part of the Law Division. The Special Civil Part allows Plaintiffs to assert a claim for up to $15,000. Complaints initiated in the Special Civil Part begin with a complaint, setting forth the amount that is claimed to be due and owing. The Defendant is then served with a copy of the Complaint and afforded 35 days to respond or file a counterclaim. The parties should then be provided with a “discovery” period, in which documents and information will be exchanged prior to trial. Under New Jersey Court Rule 6:4-5, the parties should be provided 90 days to complete the discovery process, before the trial should be scheduled. Notwithstanding this rule, it is common for Courts to cut short this time period and schedule the trial much sooner than the Court rule would seemingly permit.

On the day set for trial, the parties will generally be told to report to the Courtroom at 9:00 in the morning. The parties will then be surprised to see that they are not the only litigants in the Courtroom. In fact, there may several dozen cases scheduled for trial that same day. The Judge will call the names of the cases and instruct the parties to try their best to settle their matters. Since most counties only have one Judge trying all the Special Civil Part cases, some Special Civil Part Judges will even give a stern warning to any parties who think they will be able to bypass the mediation process and proceed directly to trial. Depending on the caseload of the county, cases that do not settle in mediation may not even be reached for trial that same day.

The benefits of mediation are numerous. Mediation enables parties to avoid the uncertainty of a trial. It saves the time and expense of a trial, which is especially important when one or more of the parties is paying for legal representation. Mediation will also allow the parties to agree on a result that would not be possible at trial. These results can include the agreement of payment plans for a party whose only objection to the action is the fact that he or she does not have the funds to pay the other party. Since Special Civil Part matters, especially with landlords and their former tenants can be very personal and contentious to both of the parties, the mediation process may afford the parties an opportunity to come to an understanding that extends beyond the monetary damages sought in the action. Finally, the agreement reached in mediation will usually contain a strict default provision, which will enable the Plaintiff to receive a Judgment, without a trial, in the event that the Defendant fails to comply with the terms of the settlement agreement.

Notwithstanding the benefits of mediation, it should be noted that an offer made in mediation should a compromise of a potential claim, in which each party foregoes some rights in order to avoid the time, expense and uncertainty of trial. A common question is whether the landlord is entitled to collect legal fees and expenses associated with the collection action and the prior eviction. While most residential leases contain a provision setting forth that the tenant is responsible for legal fees, those charges are usually part of the balance that the Plaintiff is willing to waive in mediation.

After a Judgment is entered, the Plaintiff’s first question is how he or she is going to get paid the amount due to him or her. Unfortunately, the answer to this question is not always easy. Whether the Judgment against the Defendant has resulted from a trial, a breached settlement agreement, or a default against the Defendant, the difficult part of the collection action is often the collection. In part 2 of this blog, which will be released shortly, we will discuss methods that are used to collect amounts due from Judgments.gavel.jpg