As a result of unsound real estate purchasing and borrowing decisions, coupled with the recent epidemic of losses of income, many property owners have found themselves in severe risk of foreclosure. Some owners have looked for creative ways to avoid the possibility of losing the home, which they cannot afford to pay for. This has led to an influx of landlords who have seized upon the opportunity to purchase these distressed properties and “save the owners from foreclosure.” However, landlords who have acquired title to their properties from their tenants should be forewarned that their right to evict those tenants is in jeopardy.
Under ordinary circumstances, a New Jersey landlord can expect that an action filed for non-payment of rent will result in a Judgment for Possession within about 4 weeks of the time the action is filed. The expediency of this process is attractive to most landlords who are often struggling to pay their own bills, and cannot afford to subsidize a tenant who is not paying rent. At an eviction trial, the Judge reads a preliminary set of instructions, which includes the statements that (1) he or she may not force the landlord to wait for rents, and (2) all outstanding rents must paid by the day of Court or the tenant will be evicted. However, Landlords who have acquired title to the property from the tenant, and Landlords who have given the tenant an Option to Purchase may not have the right to have their case heard in New Jersey Landlord Tenant Court.
The body of the Tenancy Complaint has been recently amended to include an inquiry as to whether the Landlord acquired title to the property from the Tenant, or alternatively, if the Landlord gave the tenant an Option to Purchase the Property. Since both of these conditions would substantially affect the equitable property rights of the tenant, the cases brought under these conditions are not easily resolved on a summary basis. To put it simply, Judges in Tenancy Division, who are often swamped with a heavy caseload of relatively simple matters, are reluctant to make the factual inquiries necessary to resolve a dispute when the ultimate issue affects the ownership of the property. Under New Jersey Statute 2A:18-52, the Tenancy Court is simply not permitted to make decisions affecting title to property.
The unfortunate result is that these matters are routinely transferred out of Tenancy Division into the Law Division (or even worse, the Chancery Division), where the parties can spend the next 12 months exchanging discovery, attending Court Ordered mediations, and waiting for trial. More importantly, the Tenancy Judge very often orders that the tenant does not need to pay rents to the Landlord until the Law Division has an opportunity to rule of the issues of the case. Under the Rules of Court, the Transfer out of Tenancy Division can be requested by the Judge, sua sponte (on his own initiative), or by one of the parties (usually the tenant).
Finally, it is a very realistic probability that a person, who was previously in risk of foreclosure, could also fail to pay his rent. Landlords who acquire title to the property from the tenant or give the tenant an option to purchase should be forewarned that their matters may be transferred out of Tenancy Division and inserted into the malaise of the Law Division. The Law Office of Michael D. Mirne has handled several thousand evictions and while only a very small percentage of cases fall into this undesirable category, it is important for landlords to exercise caution when entering into these types of arrangements.