In today’s article, we will discuss the importance of two separate documents required for residential real estate owners.
The first document is the Certificate of Habitability. The vast majority of municipalities in the state of New Jersey require the owner to obtain a new Certificate of Occupancy each time a new tenant moves in. The inspections that accompany the application for a certificate of habitability vary according to the municipality. All municipalities will check smoke detectors, and if there is gas heating, the carbon monoxide detector will also be checked. Some cities will also carry out much more extensive examinations in an attempt to increase the quality of housing throughout the city. It should be noted that it is no longer permissible for a municipality to require a new occupancy inspection certificate when a family expands by natural means (for example, the birth of a new child).
While most property owners are vaguely familiar with the fines that the municipality can impose on them for failing to obtain a certificate of occupancy, few are familiar with the much more serious consequences that can result from such a failure. When certificates of habitability are required, a rented home without a certificate of habitability constitutes an illegal contract. Therefore, in the matter of Khoudary v. Salem Board of Social Services, 260 NJS 79 (App. Div. 1992), the Court found that a landlord who rents without a certificate of occupancy does not have authority to file a rental suit.
In essence, what the Khoudary Court said was that it would not help the landlord enforce an illegal contract. In the event that the tenant vacates the property owing rents, either from previous months or from months past due according to the current lease contract, the landlord may not file an action to collect the rents, and moreover, he may not apply any of the guarantees of the lessee. deposit for these rentals. The landlord can still bring an action or retain security for damages, such as destruction of the apartment. It remains uncertain whether a court should allow a tenant to bring an action for the return of all rent previously paid under the illegal lease; however, most courts will decide that the tenant must pay for the quantum merit benefit of the use of the apartment.
For nearly a decade, the courts interpreted the ruling in Khoudary to mean that failure to obtain a Certificate of Occupancy barred eviction. However, this issue has since been cleared up. In the matter of McQueen v. Brown and Cook, 342 NJS 120 (App. Div. 2001), the court ruled that while failure to obtain a certificate of occupancy made the lease illegal, the landlord still retained the right to evict the tenant. Essentially, the Court’s decision holds that a tenant should not be able to benefit from the illegal contract and, furthermore, it is clear that leaving the tenant in the illegal tenancy would be contrary to public order.
Owner’s Registration Statement
While failure to obtain a Certificate of Occupancy is not a bar to eviction, failure to obtain a Landlord’s Statement of Registration (also known as a Landlord’s Statement of Identity) will prevent eviction. All non-owner-occupied residential dwellings in the state of New Jersey must be registered as rentals. Unlike Certificates of Occupancy, the registration statement does not require an inspection and does not need to be repeated upon the arrival of new tenants. In most cases, a single registration statement will be effective in perpetuity.
In the event that the rental is a dwelling for one or two families, the registration can be presented to the secretary of the municipality. In some cases, the municipality will charge a nominal fee for property registration and an additional fee for renewals. In the event that the property consists of three or more residential units, the property must be registered with the New Jersey Division of Community Affairs. The Owner’s Registration Statement must state the names of the owners and their emergency contact numbers.
Failure to comply with the registration requirement can have serious consequences for owners. In particular, NJSA 46:8-33 states that “no judgment for possession may be entered until there has been compliance [with the Act]…”While the Statute goes on to state that the Court can proceed with the case (up to 90 days) until the breach is corrected, some property owners may be caught off guard. Some New Jersey counties even require the property owner to provide proof of record at the time of the tenancy hearing.
Another consequence of failure to obtain a registration statement is the imposition of fines. This firm has been retained to represent several owners who have been unable to obtain registration statements. As with failure to obtain a certificate of occupancy, the penalties for failing to register can be quite steep, and cities generally impose a separate penalty for each individual dwelling within the building.
In conclusion, it’s best to make sure you get a Certificate of Occupancy and Owner’s Statement of Registration before you rent your property. If you fail to present one of these two documents, you may be subject to substantial penalties both from the municipality and in a civil action with your tenants.