The New Jersey Appellate Division in an unpublished decision, Cesar S. Arredondo v. Nersy Pujols, Docket No. A-5459-05T25459-05T2, ruled that breaches of both of a lease provision and a New Jersey statute for failing to obtain municipal permits before commencing construction work were NOT grounds for evicting a commercial tenant.  Although very fact specific to a landlord with apparently “unclean hands”, this decision highlights pitfalls that can beset a landlord in the New Jersey eviction process.

Cannot Evict for “Minor” Breaches (No Permits, No Insurance, Sidewalk Sales, Etc.)

The Appellate Division agreed with the trial court on the insurance issue and the landlord’s inconsistent testimony.  However, the Appellate Division held that the breach was “not material” to warrant the tenant’s forfeiture of his leasehold interest. The Appellate Division noted that the New Jersey statute specifically provides grounds for an eviction where there is a “…violation of such covenants or agreements” of the lease. See N.J.S.A. 2A:18-53.  However, before a judgment may be entered, the landlord must establish the breach. 

Citing New Jersey case law, the Appellate Division held an eviction based on a “forfeiture” is deemed a penalty for failing to do a particular thing.  In New Jersey, the law does not favor forfeitures and requires a trial court to strictly review the provisions of the lease that a landlord seeks to forfeit the tenant’s interest, resolving any ambiguous language in favor of the tenant.

Based on the testimony and review of the lease, the Appellate Division held the breach was a minor deviation of the lease terms.  The court held that the work was undertaken under the direct order of the plaintiff and done by an independent contractor.  Further, all work was done in a workman-like fashion and that pursuant to the Jersey City inspector, the defendant could retroactively cure any of the code violations by obtaining a permit. 

Concerns for Landlords When Instituting Eviction Action Payment Defaults

This unpublished decision raises a number of pitfalls for commercial landlords. In this case, the landlord clearly failed to submit the proper proofs.  Before instituting an action to evict a tenant, landlords should consider a number is issues including:

1)     What proofs do I have?  In this case, the landlord had serious inconsistent statement, whereas the tenant’s testimony was not questioned.  Further, the tenant had two additional witnesses to prove his case, one being a city electrical inspector; and

2)     Is the Breach “Material”?  Here, failure to obtain permits was not “material”.  However, would that have changed if what the landlord was cited for resulted in a fine or penalty from the municipality?

3)     Can the Breach be Remedied before Trial?  Here, the alleged breach of the lease became a non-issue because it was remedied prior to trial. What other breaches can be remedied?

Strategic Use of Eviction Proceedings

This and other recent decisions by the Appellate Division raise pitfalls for commercial landlords in eviction proceedings. Landlords may think to strategically use the eviction process as a way in which to make the tenants become compliant with the lease.  To lessen the legal costs, landlords should take care to place in their lease that the tenant is required to pay the landlord’s attorney fees. 

In the case discussed, although an eviction did not occur, the act of taking the case to trial precipitated the tenant to obtain the proper permits and get insurance.  However, if a landlord wishes to actually evict the tenant, it is extremely important to sit down with your attorney ascertain “minor” or technical breaches.

For more information on evictions or other commercial lease issues, please feel free to contact Christopher J. Hanlon at chanlon@hnlawfirm.com, Phone (732) 863-9900 Ext. 109.

Experienced, no nonsense attorneys for Landlords.

Commercial Landlords: Four Important Questions to Ask When a Tenant Files for Bankruptcy

With the recent downturn in the market, a number of commercial tenants are experiencing financial difficulties. In turn, this can lead to problems for commercial landlords, most importantly, the tenant staying current with lease payments. This may then lead to the tenant filing for bankruptcy protection. If your commercial tenant files for bankruptcy, it is wise to have a strategy in place to not only minimize the time of non-payment, but also maximize the ability to receive rents and damages allowed under the Bankruptcy Code. 

Following are four (4) questions for commercial landlords to review with an attorney  whenever a commercial tenant files for bankruptcy protection:

1.    Have You Filed a Proof of Claim(s)?  As soon as the tenant/debtor files for bankruptcy protection, commercial landlords should ensure their rights to payment(s) by filing appropriate proofs of claim.  It is advisable to review with your attorney the current account history and lease to ensure all fees are being accounted. Landlords may be able to file upto three (3) different types of claims:

    a.    Pre-petition Claim. Section 502 of the Bankruptcy Code provides that creditors are permitted to file a proof of claim for all pre-petition charges and assessments owed.  If a tenant files for bankruptcy, the landlord is permitted to file a proof of claim for all fees and charges incurred prior to the filing date;

    b.    Post-Petition Administrative Claim.  Section 503(b)(1) of the Bankruptcy Code provides a creditor a priority claim for all “actual, necessary costs and expenses of preserving the estate”.  If the tenant remains in the premises after the bankruptcy and does not reject the lease, the commercial landlord may be allowed payment  ahead of other creditors for amounts incurred during this period; and

     c.    Post-Rejection Damage Claim. Section 503(b)(7) of the Bankruptcy Code provides a commercial landlord the right to be paid for “post bankruptcy rejection” damages. If the tenant rejects the lease, certain damages incurred and the remainder of the lease may be permitted priority before payment of certain claims.

 2.    Is the Debtor/Tenant Assuming or Rejecting the Lease?  Landlords should inquire whether the debtor/tenant intends to assume or reject the lease.  Bankruptcy Code Section 365 provides that tenants are permitted to assume a commercial lease, as long as they cure all post-petition defaults. If they reject the lease, then the landlord may be able to proceed with an eviction action to remove the tenant. However, landlords should know that the Bankruptcy Code permits the debtor 120 days to decide whether to assume or reject the lease, with an additional 90 day extension.  All told, this can leave the landlord sitting around for more than 7 months without payment.  If your not being paid, it may be advisable to have the Bankruptcy Court allow you to proceed with an eviction action. 

 3.    Should you File a Motion for Stay Relief to Proceed with an Eviction?   The debtor/tenant may not advise their intent to assume or reject the lease.  As noted, during this time, the debtor/tenant can use the premises without paying anything.  The landlord is permitted to file a motion for “Relief from the Automatic Stay”.  This Motion, if granted,  permits the landlord to resume or commence with a state court eviction action.

4.    What to Do with Items Left by a Tenant?  If the debtor/tenant leaves equipment, inventory or equipment at the premises, can you just throw it away? Does anyone have an interest in the left over items, like the debtor/tenants’ bank?   Can you recover storage fees? When a tenant/debtor files for bankruptcy, these left over items may be part of the bankruptcy estate. Gaining proper approval from the Bankruptcy Court, before disposing of the left over “junk” is essential to limiting liability.  For instance, the left over property may be secured by a bank, financial institution or creditor. You may want to have a UCC Search conducted to ascertain whether any security interest exists.  If security interests are discovered, it is advisable to give notice to those entities, possibly through a motion with the Bankruptcy Court.
These are just a few of the questions a landlord should ask when a debtor files for bankruptcy.  By asking these questions at the start of the bankruptcy, landlords can limit the loss or liability, as well ensure their right to payment through the Bankruptcy Code.

The New Jersey Appellate Division in an unpublished decision, Cesar S. Arredondo v. Nersy Pujols, Docket No. A-5459-05T25459-05T2, ruled that breaches of both of a lease provision and a New Jersey statute for failing to obtain municipal permits before commencing construction work were NOT grounds for evicting a commercial tenant.  Although very fact specific to a landlord with apparently “unclean hands”, this decision highlights pitfalls that can beset a landlord in the New Jersey eviction process.

Cannot Evict for “Minor” Breaches (No Permits, No Insurance, Sidewalk Sales, Etc.)

The Appellate Division agreed with the trial court on the insurance issue and the landlord’s inconsistent testimony.  However, the Appellate Division held that the breach was “not material” to warrant the tenant’s forfeiture of his leasehold interest. The Appellate Division noted that the New Jersey statute specifically provides grounds for an eviction where there is a “…violation of such covenants or agreements” of the lease. See N.J.S.A. 2A:18-53.  However, before a judgment may be entered, the landlord must establish the breach. 

Citing New Jersey case law, the Appellate Division held an eviction based on a “forfeiture” is deemed a penalty for failing to do a particular thing.  In New Jersey, the law does not favor forfeitures and requires a trial court to strictly review the provisions of the lease that a landlord seeks to forfeit the tenant’s interest, resolving any ambiguous language in favor of the tenant.

Based on the testimony and review of the lease, the Appellate Division held the breach was a minor deviation of the lease terms.  The court held that the work was undertaken under the direct order of the plaintiff and done by an independent contractor.  Further, all work was done in a workman-like fashion and that pursuant to the Jersey City inspector, the defendant could retroactively cure any of the code violations by obtaining a permit. 

Concerns for Landlords When Instituting Eviction Action Payment Defaults

This unpublished decision raises a number of pitfalls for commercial landlords. In this case, the landlord clearly failed to submit the proper proofs.  Before instituting an action to evict a tenant, landlords should consider a number is issues including:

1)     What proofs do I have?  In this case, the landlord had serious inconsistent statement, whereas the tenant’s testimony was not questioned.  Further, the tenant had two additional witnesses to prove his case, one being a city electrical inspector; and

2)     Is the Breach “Material”?  Here, failure to obtain permits was not “material”.  However, would that have changed if what the landlord was cited for resulted in a fine or penalty from the municipality?

3)     Can the Breach be Remedied before Trial?  Here, the alleged breach of the lease became a non-issue because it was remedied prior to trial. What other breaches can be remedied?

Strategic Use of Eviction Proceedings

This and other recent decisions by the Appellate Division raise pitfalls for commercial landlords in eviction proceedings. Landlords may think to strategically use the eviction process as a way in which to make the tenants become compliant with the lease.  To lessen the legal costs, landlords should take care to place in their lease that the tenant is required to pay the landlord’s attorney fees. 

In the case discussed, although an eviction did not occur, the act of taking the case to trial precipitated the tenant to obtain the proper permits and get insurance.  However, if a landlord wishes to actually evict the tenant, it is extremely important to sit down with your attorney ascertain “minor” or technical breaches.

For more information on evictions or other commercial lease issues, please feel free to contact Christopher J. Hanlon at chanlon@hnlawfirm.com.

When a landlord is seeking to terminate a residential tenancy, it is important to select the proper statutory grounds under which to proceed. Under no circumstances may a tenant be legally “evicted” without meeting a statutory prerequisite. Note that the statute may require that one or more notices be served upon the tenant prior to proceeding with court action. With the exception of a tenant’s non-payment of rent, or failure to pay rent after a reasonable increase (which requires a separate notice unto itself), a landlord is required to serve notice upon a tenant prior to the institution of court action. N.J.S.A. 2A:18-61.2 provides the notice requirements. I have set forth below the text of the statute that describes the notice requirements for each section of the Anti-Eviction Act.

NJSA 2A:18-61.2. Removal of residential tenants; required notice; contents; service

No judgment of possession shall be entered for any premises covered by section 2 of this act, (2A:18-61.1) except in the nonpayment of rent under subsection a. or f. of section 2, unless the landlord has made written demand and given written notice for delivery of possession of the premises. The following notice shall be required:

a. For an action alleging disorderly conduct under subsection b. of section 2, or injury to the premises under subsection c. of section 2, or any grounds under subsection m., n., o. or p. of section 2, three days’ notice prior to the institution of the action for possession;

b. For an action alleging continued violation of rules and regulations under subsection d. of section 2, or substantial breach of covenant under subsection e. of section 2, or habitual failure to pay rent, one month’s notice prior to the institution of the action for possession;

c. For an action alleging any grounds under subsection g. of section 2, three months’ notice prior to the institution of the action;

d. For an action alleging permanent retirement under subsection h. of section 2, 18 months’ notice prior to the institution of the action and, provided that, where there is a lease in effect, no action may be instituted until the lease expires;

e. For an action alleging refusal of acceptance of reasonable lease changes under subsection i. of section 2, one month’s notice prior to institution of action;

f. For an action alleging any grounds under subsection l. of section 2, two months’ notice prior to the institution of the action and, provided that where there is a written lease in effect no action shall be instituted until the lease expires;

g. For an action alleging any grounds under subsection k. of section 2, three years’ notice prior to the institution of action, and provided that where there is a written lease in effect, no action shall be instituted until the lease expires.

h. In public housing under the control of a public housing authority or redevelopment agency, for an action alleging substantial breach of contract under paragraph (2) of subsection e. of section 2, the period of notice required prior to the institution of an action for possession shall be in accordance with federal regulations pertaining to public housing leases.

The notice in each of the foregoing instances shall specify in detail the cause of the termination of the tenancy and shall be served either personally upon the tenant or lessee or such person in possession by giving him a copy thereof, or by leaving a copy thereof at his usual place of abode with some member of his family above the age of 14 years, or by certified mail; if the certified letter is not claimed, notice shall be sent by regular mail.

NOTICE TO CEASE

Where a Notice to Cease is required, it should include as much detail as possible. This serves the dual purpose of putting the tenant on notice of a statutory (or lease) violation, and allows the tenant an opportunity to “cure” the alleged violation. If the tenant ceases the described wrongful conduct, a landlord may not proceed to terminate the tenancy. It is, in effect, a warning notice. By statute, the notice must be served upon the tenant or person in possession either personally at the demised premises, or by leaving it at “his usual place of abode with some member of his family above the age of 14 years or by certified mail; if the certified letter is not claimed, notice shall be sent by regular mail.” (See N.J.S.A. 2A:18-61.2 above.)

It is advisable to cover all 3 bases. The worst thing that can happen to a landlord’s case on the day of trial is to get “shot down” for defective service of a notice. If the notices are not correct (legally sufficient) or not properly served, the court must dismiss the landlord’s case. A defective notice or defective service is a jurisdictional defect. If a jurisdictional defect exists, the court must dismiss a plaintiff’s case.  Once dismissed, you must start all over.  Starting all over means months of additional lost rent.  It is important to stress that the acts complained of must be enunciated clearly and in detail. Remember N.J.S.A. 2A:18-61.2 says, “The notice in each of the foregoing instances shall specify in detail the cause of the termination of the tenancy…” The notice may not contain conflicting information. For instance, a Notice to Cease that contains a warning to a tenant not to pay rent late may not contain an additional notice that the tenant is obligated to pay late fees.

NOTICE TO QUIT

A Notice to Quit terminates the tenancy. If the tenant fails to cease the acts complained of in the Notice to Cease, after a reasonable period of time to cure has elapsed, or the statute does not require a cease notice, a landlord may serve a Notice to Quit for the statutory violation. Many landlords are under the mistaken impression that they must wait 30 days after serving a Notice to Cease before serving a Notice to Quit. This is just plain wrong. All that must elapse is a “reasonable” period of time and what is reasonable has to be determined on a case by case basis. The Notice to Quit also must contain a paragraph called “Demand for Possession.” A written demand for possession is required in all cases except for nonpayment of rent. If this language is lacking, the court will lack jurisdiction to hear the case. A Notice to Quit is generally served in the same manner as the Notice to Cease. (See above.) However, it is interesting to note that the statutes are silent as to how a Notice to Quit should be served.

NON-PAYMENT OF RENT

If a tenant fails to pay “rent” when due, a landlord may immediately proceed to commence a summary proceeding to regain possession of the premises. A landlord is under no obligation to wait for its rent, accept payments late, or accept rent in installments. However, if on the “return day” (day of court) the tenant appears and is prepared to pay all “rent” which is due, the landlord must accept the tender and dismiss the case.

N.J.S.A. 2A:18-55. Discontinuance upon payment into court of rent in arrears; receipt

If, in actions instituted under paragraph “b” of section 2A:18-53 of this title, the tenant or person in possession of the demised premises shall at any time on or before entry of final judgment, pay to the clerk of the court the rent claimed to be in default, together with the accrued costs of the proceedings, all proceedings shall be stopped. The receipt of the clerk shall be evidence of such payment. The clerk shall forthwith pay all moneys so received to the landlord, his agent or assigns.

(Case Law has held this statute is applicable to proceedings under the Anti-Eviction Act as well. (N.J.S.A. 2A:18-61.1.))

If a tenant agrees that certain charges constitute “additional” rent (i.e. utilities, damages, late fees) a court will likely enforce the agreement if it does not conflict with any statute, rule, regulation or ordinance such as rent control or U.S. Dept. of Housing & Urban Development regulations (”H.U.D.”).

Like almost any rule, there is an exception to the “no notice rule” for non-payment of rent cases. When filing a non-payment of rent case against tenants receiving (1) social security old age pensions, (2) railroad retirement pensions and (3) other government pensions, these tenants are afforded a 5 day grace period to pay their rent, presumably because their checks are sent to them on or about the first day of each month. (copy of the statute appears supra.) Likewise, tenants who participate in a H.U.D. subsidy program are entitled to the additional protection of federal laws that require a written notice be served upon the tenant prior to the filing of any action for eviction.

THE LANDLORD REGISTRATION ACT

By law, every landlord of a dwelling, except owner-occupied premises with not more than two rental units, must file with the clerk of the municipality in which the residential property is situated, or with the Bureau of Housing Inspection in the Department of Community Affairs, a certificate of registration. In court, a judgment for possession cannot be entered if the landlord has not complied with this registration requirement. Non-receipt of the statement is almost a standard defense by tenants who are represented by competent counsel to avoid an immediate judgment of possession. The court has the authority to stay the proceedings for 90 days to allow the landlord to come into compliance.

A landlord is well advised to consult competent counsel when seeking to properly terminate a tenancy.

At Hanlon Niemann we have experienced, qualified attorneys and para professional staff representing Landlords statewide who appear in the Landlord Tenant section of the New Jersey Superior Court every week.  Let our experience protect you.  Contact Christopher J. Hanlon at chanlon@hnlawfirm.com, Phone (732) 863-9900 Ext. 109, or Fredrick P. Niemann, fniemann@hnlawfirm.com, Phone (732) 863-9900 Ext. 105.

New Jersey law is very biased against Landlords.  One innocent mistake can be devastating to you financially.

1. When the Clerk or Judge calls the list of all matters scheduled, if the landlord is present in the courtroom and the tenant is not, the tenant will be “in default.” In that case, a judgment granting the landlord possession of the leased property may be entered against the tenant after the landlord has filed an affidavit proving a right to possession.  If the tenant is present in the courtroom and the landlord is not, the landlord’s complaint will be dismissed without prejudice, meaning it may be filed again without penalty.

2. In non-payment of rent cases, the tenant has the right to pay the full amount of rent into court (or with the clerk) by the close of the business day that the trial is set for and have the case dismissed.

3. A landlord may not evict a tenant based upon failure to pay any attorneys’ fees, costs or late charges, unless there is a lease provision which states that such fees are collectible as rent. Even if the lease allows such charges to be collected, the amount due as rent may be limited by a rent control ordinance, or in the case of public or federally-assisted housing, by federal law.

4. A landlord may decide to settle a case before court, but the decision is entirely voluntary. Any settlement should be reduced to writing and filed with the court. This will protect both parties in the event of a breach by the other. Most Courts require that the terms of the agreement be “placed on the record,” in open court. This is for the protection of both parties as well. A settlement agreement should be placed “on the record” as a matter of course if there are complex terms, or if the tenant is agreeing to vacate.  An experienced legal representative should be present to protect you during any settlement.

5. If the tenant wishes to challenge the allegations or accuracy of anything stated in the complaint, including the amount of rent due and owing, the tenant has a right to a trial before a judge.

6. The entry of a judgment for possession means that a landlord may request the court clerk issue a Warrant for Removal to a Court Constable and the tenant can be evicted.

7. If a judgment for possession is entered, a Warrant for Removal may not be issued until three days later. The Warrant for Removal authorizes a Special Civil Part Officer (Constable) to lock out the tenant three days after the Warrant has been served on the tenant. Service of the Warrant is generally accomplished by the Officer leaving a copy at the tenant’s apartment. The lock out may not occur on a weekend or on a judicial holiday. Also, weekends and holidays are not counted in calculating the number of days before the Warrant can be signed or issued. This means that the tenant will be locked out at a minimum of eight days from the day judgment of possession is entered.

8. If a judgment for possession is entered after a trial, or because a tenant did not appear in court, or because the tenant agreed with the landlord to the entry of a judgment, a tenant has the right to apply to the court for a hardship stay at any time up to ten (10) days after the Warrant for removal has been executed (door locked!) The court may grant or deny the stay and the landlord has a right to be heard at the hearing on the application. A stay of the judgment means that the tenant will not be removed for as long as the stay is in effect. The court may grant a stay for up to a maximum of 6 months. During the period of the stay, the tenant must pay all back rent, pay the future rent on time, not disturb the neighborhood, and not damage the property. After the stay is over, the tenant may be evicted by the landlord through the Constable without any further judicial action unless the Court grants an extension not to exceed 6 months from the date of judgment.

9. The Court provides a list of social service agencies that may be able to help tenants find other housing or provide grant monies.

10. If a landlord and tenant agree to an eviction, a consent judgment for possession must be prepared. When this happens, the landlord must also submit, in writing, a sworn statement that one of the causes for eviction authorized in the eviction statute has occurred. This sworn statement must be filed before the court will accept the consent judgment. The sworn statement must also state that all fees and charges sought by the landlord are allowed by federal, state and local law, as well as the lease.