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Notice Isn’t Enough: The Need for Evidence in Support of Rent Increases (NJ)

A prior post explained that under the Anti-Eviction Act rent increases are subject to a five-part test. Even though landlord-tenant trials can be simple and speedy, the Rules of Evidence still apply. Landlords must present competent evidence supporting their right to a rent increase. The types of evidence may vary, but should generally be in line with evidence offered in Fromet Properties, Inc. vs. Delores Buel, et al, 294 N.J. Super. 601 (App. Div. 1996).

In Fromet Properties, Inc. vs. Delores Buel, 294 N.J. Super. 601 (App. Div. 1996) the court presented a five-part test for determining the legality of a rent increase. The court stressed the consideration of prevailing rents in the area and the percentage of increase in rent sought. Importantly, the increase should be measured against the court’s general knowledge and whether the rent increase would “shock the conscience of a reasonable person.” The court added that there may be additional factors which, on a case by case basis, a court may consider, and therefore the five-part test shall not be deemed exhaustive.

The tenants presented three witnesses. Two tenants described conditions within the mobile home park citing examples of disrepair, improper maintenance, inadequate snow blowing, and drainage problems. The third witness was offered as an expert in fair rental value. The witness, a licensed real estate broker, testified specifically that the fair market rents of six other mobile home parks ranged from $168 to $247, with a weighted average of approximately $200 per month. The witness added that in his opinion the rent increase sought by landlord was “one that is not governed or restrained by conscience, is unreasonable, immoderate or excessive.”

The landlord presented two witnesses, the President and another owner of a similar mobile home park in the area. Both witnesses testified that six other mobile home sites in the geographic area charged monthly rents similar to that of the amount charged in question. During discovery, the landlord produced financial justification during discovery for the intended rent increase. Among the documents and interrogatory answers provided were the landlords federal tax returns for the past three years.

The court concluded that the rent increase was not unconscionable. The judge considered the testimony of each witness and gave careful consideration to the expert testimony as well as to the testimony about the prevailing rents in nearby mobile home parks. Specifically, the judge considered the fact that the landlord has not raised the tenants’ rents for three years. The court noted, that although the increase in rent was 28%, this fact was mitigated by the absence of any rent increase during the prior three-year period.

Landlords seeking to increase rent should be prepared to meet the five-factor test on the day of the hearing. Courts believe that most landlords will be prepared to prove the need for a rental increase with financial information on that day. Courts expect landlords to have this information because it should be kept in the regular course of business. This included federal tax returns, proof of similar rent prices in the geographic area, and the operational costs and expenses of maintaining the property. It is important for landlords to understand and prepare to meet this burden. Failing to do so risks losing the ability to increase rent for their properties.

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