Bryant v. Rice

A-7353-97T2F (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: April 12, 1999

LANDLORD-TENANT; AFFORDABLE HOUSING—Good cause to evict under the Cranston-Gonzalez National Affordable Housing Act embraces a concept of economic hardship on a landlord and can lead to the right to evict a tenant because the allowable rent is too low.

A landlord purchased a two family home under the Cranston-Gonzalez National Affordable Housing Act. This Act provides grants to qualified low to moderate income buyers to permit them to purchase two-family houses. In exchange for the grant, the buyer agrees to maintain occupancy in the first unit and to rent the second unit at a rent equal to thirty percent of its tenant’s income, but not to exceed $600 per month. The tenant’s total income is determined annually through an income certification process. The owner, as landlord, rented an apartment for $600 per month. Upon an initial certification, the rent was reduced by a very small amount, based upon the 30% formula. A subsequent recertification dramatically reduced the rent further and the landlord sought to terminate the lease and evict the tenant. In essence, the eviction process resulted in the tenant being required to pay considerably more than the rent would have been based on the recertification. Ultimately, the tenant sued for a refund of excess rent paid and a trial took place. At trial, the municipality’s Director of Community Development testified that a homeowner is under no legal obligation to continue renting to a tenant upon recertification. The Director explained as follows: “each year we do an annual recertification. Once again we send out the letter to the landlord. If the rent is insufficient for them to assist in helping them carrying the cost of their mortgage with what they’re putting in and what the rental income is, it’s up to the homeowner to re-rent that unit.” Further testimony was to the effect that if the homeowner nonetheless permits the tenancy to continue, he or she cannot charge a rent in excess of the amount calculated upon recertification. Furthermore, the Director’s testimony indicated that the tenant was not currently certified to rent the premises. Instead, another person had already been certified at the maximum rental to rent the second unit.

The lease that was in effect at the time of the litigation was one that was executed at a rental far above the very small amount that had been certified a year earlier. The landlord testified that he did not want to rent to the tenant at the very low rent that had been certified and told her that if she did not sign the lease he would have find another tenant. The tenant, desiring to stay on the premises, agreed to sign a lease at a rent considerably more than the minimal rent that had been certified.

The Court found that in executing the lease for a rental exceeding 30 percent of the tenant’s income, the requirements of the program were violated. Both landlord and tenant were prohibited from entering into a side agreement for a monthly rent higher than that set by the certification. However, the parties did not conceal that lease arrangement. Although the lease was filed with the municipal agency responsible for administering the program and in fact, that agency was required to verify that the rental amount corresponded to the recertification figure, neither landlord or tenant was advised that the arrangement was illegal. Consequently, under those “unique circumstances,” the Court believed that the tenant was only entitled to damages from the time when she first complained that the rent could not exceed the very low, recertified amount. Even though the Consumer Fraud Act applies to the rental of residential apartments with the landlords as “sellers” and tenants as “consumers,” the Court found that the landlord did not engage in any fraudulent conduct. He did not actively conceal the fact that the tenant was only legally required to pay a minimal amount. The landlord merely told the tenant that he could not accept the minimal amount and that unless she agreed to the higher rent he would be forced to find another tenant. Consequently, the landlord did not violate either the letter or spirit of the Consumer Fraud Act.

The lower court entered a judgment of possession in favor of the landlord, finding that the landlord had established good cause for terminating the tenancy in that his loss of income resulting from a substantial decrease in the legal amount of rents caused him economic hardship. The Appellate Division agreed. Both courts rejected the tenant’s assertion that once she was in the program, she remained until the expiration of the homeowner’s obligation. According to the Court, the purpose of the program was to provide home ownership and affordable housing to persons within certain economic parameters. As such, the purpose would be undermined if a homeowner lacked sufficient funding to maintain the property and therefore faced the risk of losing the property to a foreclosure because of its tenant’s decreased rental amount. Consequently, the “good clause” criteria of the Act embraces a concept of economic hardship that can lead to eviction of a tenant under this federal housing program.