by Jerry A. Nelson, Esq. and Thomas S. Onder, Esq.

There’s a big demand for multi-family and mixed use properties in New Jersey. Savvy owners have an opportunity to provide valuable housing and make a good profit at the same time. However, New Jersey has very strict residential leasing laws. If you violate these laws when leasing and operating properties, you can lose money and suffer civil, as well as possible criminal penalties. The good news is that adept counsel can help you to comply with these residential laws.

The Truth In Renting Act: In New Jersey, residential landlords are required to strictly comply with New Jersey’s Truth In Renting Act (the “Act”). The Act requires landlords to give a copy of a current statement to each tenant when a lease is entered into, and to make available the current statement in the building where the tenants can easily find it.

Landlords should also keep documentation or receipts verifying distribution of the statement to tenants. The current statement contains many pages and generally outlines information about the lease, security deposit, discrimination, safety, health and many other issues related to a rented home including, without limitation, information related to child protection window guards, carbon monoxide and smoke detectors, and lead-based paint disclosures. The Act requires the New Jersey Department of Community Affairs to prepare, distribute, and update annually a statement in English and Spanish of the established rights and responsibilities of residential tenants and landlords in New Jersey. Since landlords must distribute the current statement within 30 days after the Department of Community Affairs makes it available, it is important to keep up with any changes to comply.

Security Deposit Act: Residential landlords in New Jersey must stringently comply with New Jersey’s Security Deposit Act to avoid criminal and civil penalties, including imprisonment, fines, and penalties such as having to pay double the security deposit, plus attorneys’ fees and costs. The Security Deposit Act includes many requirements, and the following is a general summary of only a few of the requirements, which are described in more detail in the Security Deposit Act.

First, within 30 days of receipt of the security deposit and at the time of each annual interest payment (which tenants are entitled to receive as described in the Truth In Renting Act and Security Deposit Act) the landlord must notify the tenant in writing of the name and address of the banking institution or investment company at which the money is deposited, the amount of the deposit, type of account, and current rate of interest for the account.

Second, the landlord must notify the tenant within 30 days of transferring the security deposit money to a new landlord or moving the security deposit to another account or bank.

Third, a landlord must return the security deposit, plus interest earned less permitted itemized deductions, to the tenant within thirty days after the end of the tenancy.

Fourth, security deposits may not exceed one and one half month’s rent. Fifth, landlords are not allowed to take administrative expenses from the security deposit money.

Abandoned Tenant Property Act: In New Jersey, rigorous compliance with New Jersey’s Abandoned Tenant Property Act is mandated. The Abandoned Tenant Property Act applies to any property left in premises. It is important that the Abandoned Tenant Property Act be adhered to, and procedures should be developed with counsel to ensure compliance. For instance, once an eviction occurs or tenant leaves a 33-day notice letter should be sent to commence the clock running for the New Jersey Abandoned Tenant Property Act. Additionally, you may want to consider including adequate language to reduce risks in leases, checking if other parties have rights to abandoned property and obtaining waivers to the extent permitted by law.

New Attorneys’ Fee Law: In New Jersey, residential and commercial leases must expressly permit attorneys’ fees, late charges, and other charges as “additional rent” in order for a judge to consider those expenses as additional rent in a summary dispossess proceeding. Even if the lease permits recovery, such charges may be prohibited by applicable law. Additionally, if a residential lease permits the landlord to recover attorneys’ fees and expenses, new additional language is required in New Jersey in order to permit recovery of attorneys’ fees and expenses as of February 1, 2014, as provided in the new law. You will be grandfathered in under the old law if you do not have the “new” attorney fees language in an existing lease. However, this new language must be in any renewals as of February 1 (i.e. tenants lease runs out May 1 and they want to renew, you have to provide them a lease with this language as a renewal).

Other Laws: In addition to strictly complying with the above laws, landlords in New Jersey must also adhere with all other applicable federal, state, and local laws and requirements, including, without limitation, the Fair Debt Collection Practices Act, New Jersey Consumer Fraud Act, environmental laws, employment laws, and all other applicable notice, registration, Certificate of Occupancy, land use, construction, disclosure, and other requirements, including all required court eviction procedures, such as obtaining a Judgment for Possession in court and a Warrant of Removal executed by a court officer. It is important to consult counsel since “self help” evictions are illegal and if you fail to strictly comply with all required legal notices, procedures and deadlines, deal with defenses, and handle hearings, you can lose your rights and suffer civil and possible criminal penalties.

Obtain Outside Counsel To Comply With Laws: These are just a few landmines to avoid when leasing and operating multi-family and mixed-use properties. Evaluating these issues requires careful review on an individual basis. Having an attorney familiar with these issues is critical in ensuring that you do not violate laws.

Jerry A. Nelson is a shareholder and member of Stark & Stark’s Business & Corporate and Real Estate, Zoning & Land Use Groups.

Thomas S. Onder is a shareholder and member of the Commercial and Industrial Real Estate, Litigation and Bankruptcy & Creditor’s Rights Groups of Stark & Stark. www.stark-stark.com

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