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Hudson View Gardens, L.L.C. v. Reyes

A-4824-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

LANDLORD-TENANT; EVICTION — A landlord cannot include certain charges, such as late fees and attorney’s fees, as additional rent when it excludes those same charges from calculations used by a rent leveling board to set acceptable rent increases; thus, a residential tenant need not pay those charges as rent or additional rent in order to avoid eviction.

A tenant of a multi-dwelling building received a rent increase notice from a new landlord who had just purchased the building. After not receiving rent from the tenant for the first four months after it took title, the landlord sought to evict the tenant. The landlord claimed back rent, which amounted to more than was indicated in the notice of increase, along with a monthly late fee and payment for damage that it claimed was caused by the tenant. The tenant did not show up for a rescheduled hearing and a default judgment was entered. The tenant then moved to have the default judgment vacated. The lower court stayed the judgment for possession, but ordered the tenant to deposit monies with the landlord’s attorney including the seven months’ back rent with the landlord’s attorney. It used the rental amount prior to the landlord’s increase.

The default judgment was later vacated and, at the lower court’s suggestion, the landlord went to the municipal rent leveling board for a determination of the amount of rent due. The board found that a previous rent abatement for diminishment of services had ended and that the landlord was entitled to the rent set forth in its notice to the tenant. The landlord later brought and prevailed in a second action for possession based on subsequent non-payment of rent. After the tenant failed to meet the deadline for paying the amount owed to the landlord, the lower court issued an order for possession. This judgment for possession was stayed pending appeal, but the tenant was ordered to continue paying rent to the landlord.

On appeal, the tenant argued that she should have been credited with the amount of an overpayment she claimed to have made in the landlord’s earlier action for possession and which was not a part of the claims under consideration. The Appellate Division noted that the tenant had always been free to pursue a separate action on her claim for the alleged overpayment, but never did. Consequently, it found that the lower court correctly confined its decision to the rent due for the ten month period claimed in the landlord’s second action for possession. It, however, agreed with the tenant that the lower court incorrectly included late fees and attorney’s fees as additional rent owed to the landlord. The Court also noted that those amounts, when included in the rent, exceeded the four percent annual cap for rent increases imposed by the rent leveling board. Therefore, the landlord could not in the first instance include them as additional rent under the lease and then exclude those same charges from calculations used by the board to set acceptable rent increases.

Based on its findings and conclusions, the Court remanded the matter to the lower court for a calculation of the amount due absent the excluded late fees and attorney costs. At the same time, it affirmed the lower court’s judgment for possession on the basis that the tenant had not paid the amounts due to the landlord.

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