by Jonathan Mehl, Esq.
A landlord is required to know the laws pertaining to the ownership and operation of a rental property. This includes any municipal rent control ordinance. If, a landlord raises a tenant’s rent in violation of the local rent control ordinance, the landlord can be found to have violated the New Jersey Consumer Fraud Act. A violation of the Consumer Fraud Act has serious consequences. The consequences include awarding a tenant treble damages, as well as attorney’s fees and costs.
The application of the Consumer Fraud Act to a landlord – tenant relationship was recently reaffirmed in the case of Heyert v. Taddese, decided by the New Jersey Appellate Division on June 25, 2013. In the Heyert case, the landlord had received a hardship rent increase from the rent control board. Several tenants banded together in a lawsuit against their landlord, Taddese challenging the Hoboken rent control board’s determination.
The landlord wanted further relief, and also challenged the determination and the Constitutionality of the rent control ordinance. The cases were consolidated with the main issue being the tenants claims that the rent increases violated the New Jersey Consumer Fraud Act. The rent control ordinance was found to be legal since States have the power to regulate in order to protect the health, safety or welfare of the community. A rent control ordinance falls within this. Unless a party can meet the heavy burden that an ordinance is so vague that people need to guess at its meaning, an ordinance is deemed to be valid.
In finding that the rent increases did in fact violate the Consumer Fraud Act, the New Jersey Superior Court Appellate Division reiterated that the landlord’s lack of knowledge as to how to apply or not to apply the rent control ordinance to the landlord’s apartments was irrelevant. Other than for perhaps an owner occupied two family house which is the landlord’s only property, a landlord is considered to be in the business of renting apartments.
The Consumer Fraud Act has three basic categories: affirmative actions, knowing omissions, and violations of law. A person who claims to be aggrieved by the Consumer Fraud Act must show three elements: unlawful conduct, an ascertainable loss, and a causal relationship between the unlawful conduct and the person’s loss.
Charging rent in excess of that permitted by a rent control ordinance is unlawful conduct, and clearly leads to a tenant’s loss. The loss is calculated as the difference of the rent charged and the legal rent.
Therefore, each landlord must determine whether a rental apartment is subject to a rent control ordinance. If you are unsure, inquire from the local rent control officer, as well as your attorney. Get a copy of the ordinance, read it, and make sure that you fully comply with the ordinance. If you overcharge a tenant, there is a possibility that a tenant can bring a claim against you. A claim can be brought before the local rent control board seeking a refund or credit of any overcharges. However, the danger is that a tenant brings a lawsuit claiming a violation of the Consumer Fraud Act. If successful, the tenant would be entitled to a judgment for triple the amount of the overcharge, together with any attorney’s fees and costs. This could prove to be very costly.
Jonathan R. Mehl, Esq. devotes his law practice to fully serving the legal needs of real estate investors. His practice includes: transactions, evictions, lease negotiations, and defending violations. Jonathan@MehlLegal.com