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Contimortgage Corp. v. Shea

A-3291-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

FORECLOSURE; EVICTION—Even if a family member is a tenant under a written lease, the Anti-Eviction Act won’t protect him or her from removal by a foreclosing mortgagee where the family member actually shares the living unit with the defaulting related property owner and, in effect, does not have exclusive possession of the living unit.

A homeowner filed for bankruptcy, which led to the property being sold at a sheriff’s sale. The owner’s daughter was able to purchase the property from the buyer by obtaining a mortgage. After purchasing the property, the daughter entered into a written lease agreement with her mother, the original owner. The mother was then injured, which prevented her from working and paying rent. As a result, the daughter gave up her own employment to care for her mother and encountered financial difficulties which caused her to file bankruptcy. The lender then moved forward with foreclosure proceedings and was the successful bidder at the sheriff’s sale. However, the foreclosure documents were directed only against the daughter, and did not name the mother-tenant. The daughter then directed the mother to make rent payments to the lender.

Later that year, the mortgage company served a notice of eviction directed to the daughter and all family members. The daughter sought to stay the eviction on the grounds that her mother was a valid tenant who had not been served in the mortgage foreclosure or in the eviction proceedings. After a hearing, the lower court found that the mother was not a bona fide tenant because she did not have exclusive possession or “exclusive control of possession” of the property, even though she was entitled to do so under the lease. Not only was the mother living on the property, but both the owner and an aunt also occupied the premises.

On appeal, the mother argued that she was entitled to a stay of the eviction because she was a tenant and was not named in the foreclosure suit. She also contended that although she did not have actual exclusive possession, she had such a right by virtue of the written lease. The basis for her argument was the Anti-Eviction Act, whereby a tenant cannot be removed from a residence in the absence of a statutory category of good cause. Therefore, because the mortgage company did not allege any good cause, she claimed to be protected from eviction as long as she remained a tenant paying the appropriate rental value. The Act further protects tenants from eviction by foreclosing mortgagees regardless of when their tenancy was established – before or after the execution of the mortgage.

The Appellate Division felt the fundamental issue was whether the mother was a tenant, a licensee, or involved in a sharing arrangement. The Court pointed out that conveyances between near relatives or close friends are subject to close scrutiny. The burden of proving such a leasehold is on the party asserting its existence.

A tenancy must include the right of exclusive possession of the premises. Factors that show exclusive possession do not occur include that “the owner lived in the same building ... the owner retained a key to the occupant’s rooms; the owner was charged with cleaning hallways and windows; the owner had the right to enter the premises and to make repairs; the occupant shared a bath or kitchen with the owner; the premises were furnished; maid service was provided; towels and linens were supplied; light, heat, and water were provided.”

The Court commented that it had never seen a case of a tenancy in which an individual allegedly had a right of exclusive possession but did not exercise it. The Court found it important that the lower court had determined that the mother did not have “exclusive control of possession of [the] premises.” Furthermore, the daughter even stated that she wanted her mother to stay with her, and that she expected to be her mother’s caretaker; even though the mother had not paid rent for a period of time, the daughter admitted that she would never evict her and there was no evidence that the mother ever sought to exert exclusive control over the property.

The eviction was not barred by the Act. The purpose of the Act is to protect blameless tenants from eviction when they had rented property from a landlord that could not meet mortgage obligations. Here, the Court found that the mother knew that the foreclosure proceedings were underway when she entered into her lease agreement. The mother’s failure to pay rent actually helped cause her daughter, the landlord, to default on the mortgage, which ultimately resulted in the foreclosure proceedings. Thus, since the mother was not considered a tenant, she was not entitled to the protection of the Act.

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