In today’s article, we will discuss the importance of two separate documents required for owners of residential real estate.
Certificates of occupancy
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 occupancy 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 conduct much more extensive reviews 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 through natural means (for example, the birth of a new child).
While most homeowners are vaguely familiar with the fines that can be imposed by the municipality for failing to obtain a certificate of occupancy, few are familiar with the much more serious consequences that can result from such failure. When certificates of habitability are required, rented housing 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 has no authority to sue for rentals.
In essence, what the Khoudary Court said was that it would not help the landlord to enforce an illegal contract. In the event that the tenant vacates the property owing rent, either from previous months or months due under the current lease, the landlord may not file an action to collect the rent, and moreover, may not apply any of the tenant guarantees. deposit for these rentals. The landlord can still bring an action or withhold collateral for damages, such as the destruction of the apartment. It remains uncertain whether a court should allow a tenant to bring an action for repayment of all previously paid rent under the illegal lease; however, most courts will decide that the tenant must pay for the quantum merit benefit of using the apartment.
For nearly a decade, the courts interpreted the ruling in Khoudary to mean that failure to obtain a Certificate of Occupancy precluded 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 rental would be contrary to public order.
Owner Registration Statement
While failure to obtain a Certificate of Occupancy is not a bar to eviction, failure to obtain a Landlord Registration Statement (also known as a Landlord Declaration 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 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 filed with 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 dwellings, 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 may be entered for possession until there has been performance [with the Act]…”Although the Statute goes on to state that the Court may continue the case (up to 90 days) until the default is corrected, some landlords may be caught off guard. Some New Jersey counties even require the landlord to submit proof of record at the time of the lease hearing.
Another consequence of failure to obtain a registration statement is the imposition of fines. This firm has been retained to represent several homeowners who have been unable to obtain registration statements. As with failure to obtain a certificate of occupancy, the penalties for not registering can be quite steep, with cities generally imposing a separate penalty for each individual dwelling within the building.
In conclusion, it is best to ensure that you obtain a Certificate of Occupancy and Owner Registration Statement before renting your property. If you forget 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.