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Stillman v. Korenstein

A-6065-00T5 (N.J. Super. App. Div. 2002) (Unpublished)

LEASES— Not all illegal tenancies relieve a tenant of the obligation to pay rent, but one that is uninhabitable certainly does.

A property owner illegally leased the third floor of a converted home to a family for use as a residential apartment. When the owner acquired the property, it was being used for residential purposes. He then obtained permission to convert the premises into an office, but the planning board specifically prohibited the owner from leasing the third floor separately, only allowing it to be used only as a library or conference room by the first and second floor tenants. When a family inquired about renting the third floor, the owner told them that the residential use was permitted if they conducted business there. They pretended that the residential use was to watch over the premises. When the family complained to the municipality about the lack of heat or electrical service, it was advised that the tenancy was illegal and that they were required to leave. They were further advised that if they continued to pay rent they would be subject to municipal penalties. The family did not pay rent while they were seeking other living accommodations. They then sued the owner for damages for the unrepaired leaks and for the period in which they had no heat or electricity. The owner filed a countersuit for unpaid rent and for damages to the property. The lower court found no damages to the property and required the owner to return double the security deposit. The Appellate Division affirmed. It found that the family was entitled to the return of its security deposit doubled, minus any offsets. It rejected the owner’s claim for property damage. As to the issue of unpaid rent, the Court held that not all illegal tenancies permit a tenant to remain, while looking for other housing, without paying rent. By example, where a tenancy may be illegal because a certificate of occupancy was not obtained, but the premises are otherwise suitable and habitable, the tenant still must pay rent. In this case however, use of the premises was prohibited for residential purposes. The owner fraudulently represented that they were usable. Further, the premises were not habitable. Therefore, the owner was not entitled to rent and was required to return the security deposit doubled.


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