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NJ Illegal Apartments & Consumer Fraud, Part 1: Two Remedies for One Wrong?

New Jersey tenants are protected by the Anti-Eviction Act (NJSA 2A:18-61.1) and the Consumer Fraud Act (NJSA 56:8-1 et. seq.). Pursuant to Anti-Eviction Act, tenants living in illegal apartments are entitled a statutory relocation benefit of six times the monthly rent (NJSA 2A:18-61.1(g)(2) & NJSA 2A:18-61.1h). On the Consumer Fraud Act side, consumers are protected from unconscionable commercial practices which cause the consumer to suffer an “ascertainable loss.” Violations of the Consumer Fraud Act can trigger a consumer’s right to triple damages; an enhancing remedy in line with the relocation benefit. In the context of illegal apartments, can the Consumer Fraud Act and Anti-Eviction Act combine to give tenants two equally powerful remedies? The answer turns on how the damage to the tenant is characterized.

For starters, the Consumer Fraud Act applies to landlord-tenant relationships. 9 Prospect St. Tenants Ass’n v. Sheva Gardens, Inc., 227 N.J. Super. 449 (App. Div. 1988) To prevail on a Consumer Fraud Act claim a plaintiff has to show (1) unlawful conduct by the defendant; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendant’s unlawful conduct and the plaintiff’s ascertainable loss. Dabush v. Mercedes-Benz USA, LLC, 378 N.J. Super. 105, 114 (App. Div.) Applying this recipe to illegal apartments looks something like this:

(1) The unlawful conduct is the landlord’s renting of an apartment that either (a) violates the town’s zoning laws or (b) violates the town’s building/housing code laws. Renting the apartment is unlawful because illegal apartments can be unsafe, under-inspected or uninspected; (2) The loss is the sudden incurrence of moving expenses when the town requires that the landlord evict the tenant. The loss may also be a failure of consideration on the part of the landlord to furnish a legal apartment and (3) if not for the landlord’s renting of the illegal apartment the tenant would not have suffered the loss associated with sudden moving and the expense of rent for a place the landlord lacked a legal right to rent.

An important part of this analysis is how the “loss” is styled. For highly technical legal reasons, a stronger case is one where the “loss” is the payment of rent for an apartment to which Landlord had no right to rent (the apartment is illegal, after all). There is Consumer Fraud Act case law that suggests that the CFA is displaced first by other “regulatory schemes” which in this case would be the Anti-Eviction Act and Relocation Benefit. With the loss styled as this “failure of consideration,” a tenant can ask a court to triple the amount of rent paid for an apartment which the landlord should not have rented.

Another important part of the analysis is when or if the Landlord knew that the apartment was illegal. An “innocent” landlord who purchases a house with a basement tenant and later finds out that the tenant’s unit is illegal has a better defense than a landlord who affirmatively rents a known illegal apartment. This is because knowing affirmative acts are more likely to be considered unconscionable than innocent failures of “due diligence.”

Part II of this Post will explain the legal distinction between the failure of consideration and other harm. For now, tenants in New Jersey should know that the law may provide a narrow avenue for recovering rent paid toward an illegal apartment as consumer fraud damages.

Since the facts of each circumstance vary, a landlord or tenant should consult an attorney with his/her specific circumstances. Offit Kurman practices landlord tenant law throughout New York and New Jersey assisting landlords and tenants in avoiding unnecessary and costly delays. The firm’s geographic practice area includes: New York City (Manhattan, New York County, Brooklyn, Kings County, Queens, Queens County, Bronx County, Staten Island, Richmond County) and New Jersey (Jersey City, Hoboken, Bayonne, Hudson County, Newark, Essex County, Woodbridge, Middlesex County, Paterson, Passaic County). The Firm invites you to visit the “Promises” page for our new way of doing business