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Bloomfield Condominium Associates v. Ljuljdjurovic

A-6800-02T5 (N.J. Super. App. Div. 2005) (Unpublished)

LEASES; RENT INCREASES — Although there is a five factor test as to whether the amount of a residential rent increase is reasonable, a court that uses a reasonable and balanced approach in evaluating the increase does not have to expressly consider the landlord’s expenses and profitability.

In 1999, a landlord attempted to increase a tenant’s rent by $400 per month. At that time, a lower court, noting that the landlord had sent inconsistent increase notices, granted a $40 per month increase in the rent. When that rental term expired, the landlord sent the tenant another notice increasing the rent by almost $300 per month. This time, however, the lower court approved of the increase. In that case, the Appellate Division reversed. In doing so, it reaffirmed the principle articulated in an earlier Appellate Division case which placed the burden on a landlord to prove that a proposed rent increase was conscionable. In that earlier decision, the Court listed five factors to be considered: (a) the amount of the proposed increase; (b) the landlord’s expenses and profitability; (c) how the existing and proposed rents compare to rents at similar properties in the area; (d) the relative bargaining position of the parties; and (e) based on the judge’s general knowledge, whether the rent increase was shocking to a reasonable person. The Court noted that the lower court did not weigh those factors before concluding that the increase was not unconscionable.

The landlord once again attempted to increase the rent, and, when the tenant did not pay it, the landlord filed an eviction proceeding based on non-payment of rent based on the increased rent. This time, when the lower court determined that the rental increase was reasonable, it articulated three grounds for its conclusion. It determined that the increased rent was reasonable, in line with comparable rentals, and that it did not shock the conscience. The tenant challenged the lower court’s decision because it had not evaluated the landlord’s expenses and profitability as required by the earlier decision. Nonetheless, the Appellate Division affirmed, even though it noted that the lower court should have evaluated all five factors it suggested in the prior case because it directed the lower court to do so. However, the Court determined that the lower court’s failure to address the landlord’s expenses and profitability in upholding the rent did not make its decision unfounded. It found that the lower court, on the whole, used a reasonable and balanced approach in evaluating the reasonableness of the rent. Furthermore, the Court noted that the tenant failed to show how the result would have been different had the lower court evaluated the profitability in addition to the other factors.

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