What Developers Need to Know About New Jersey’s Rent Control Exemption Law to Ensure Entitlement to Exemption for Newly Constructed Multi-family Housing.
A property owner in Jersey City is facing a $400 million federal class action lawsuit alleging that the landlord did not follow the procedural steps required to be eligible for exemption from local rent control laws. New Jersey’s Newly Constructed Multiple Dwellings Law, N.J.S.A. 2A:42-84.1(“Rent Control Exemption Law” or “Law”)) provides a 30-year exemption from rent control for newly constructed dwellings with four or more residential units.
The Plaintiffs allege that their landlord, Equity Residential, failed to submit the required documentation to claim the rent control exemption and that Equity Residential has illegally charged market rents without local rent board oversight. The litigation is ongoing, and the Portside Tenants Association has advocated strongly for Jersey City to aggressively enforce the procedural requirements of the Rent Control Exemption Law.
The landmark suit is believed to be the largest rental control class action lawsuit in history. The case is also significant in that it could establish precedent for similar rent control lawsuits currently pending in Jersey City and across New Jersey. The procedural requirements of the Rent Control Exemption Law are straightforward, but the consequences of getting it wrong can be astronomical.
New Jersey’s Newly Constructed Multiple Dwellings Law
New Jersey does not have a statewide rent control law. However, municipalities may adopt ordinances regulating the amount and frequency of rent increases within their specific municipality. The Rent Control Exemption Law provides a process by which developers can claim an exemption from local rent control laws for 30 years after issuance of a certificate of occupancy.
The Law is meant to encourage development of new housing, but developers are required to comply with certain procedural requirements to become eligible.
Specifically, a developer seeking exemption from local rent control under the Rent Control Exemption Law must:
Provide written notice to the municipal construction official at least 30 days before a certificate of occupancy for the property is issued. This notice must detail the exemption, its start date, and the number of rental units in the building.
Include a rent control exemption provision in the lease. This requirement applies to all leases offered to prospective tenants through the duration of the exemption.
Developers must coordinate with municipal construction officials throughout the building process, making it critical to understand construction law requirements that intersect with rent control exemption filings.
If the notice requirements are satisfied, new construction residential properties will be exempt from local rent control or rent leveling ordinances for 30 years following the completion of construction or during the period of amortization of the property’s initial mortgage loan, whichever is less.
What Happens When a Rent Control Exemption Notice Isn’t Timely Filed
The Portside Tenants Association litigation stems from a claim by the Plaintiff that the landlord did not timely file a notice of exemption with the construction official and are therefore ineligible for the exemption. The Plaintiffs’ claim is not without merit. Willow Ridge Apartments, LLC v. Union City Rent Stabilization Board, the Appellate Division held that even a subsequent owner who did not originally develop the building may not claim exemption from local rent control if the previous owner did not follow the procedural requirements for exemption.
The Appellate Division further held that the burden of proving that a claim for exemption was properly filed lies with the owner. In so ruling, the court emphasized that any lack of due diligence by the subsequent owner “should not be visited upon the municipality.”
Scarinci Hollenbeck represents developers, landlords, and other property owners in Jersey City and across the state, with a proven track record of successfully navigating the most complex real estate development projects. We will make sure that eligible developments properly file for the exemption, and we can help with due diligence on the purchase of an existing building to ensure you do not purchase a building that could expose you to massive liability If you didn’t send the required rent control exemption notice when it was due, or don’t know if timely notice was provided, we can help. Contact a member of our Real Estate Development & Land use Practice today.
BESS Interconnection: Managing Grid, Cost, and Schedule Risk
For battery energy storage system (BESS) developers, securing equipment and site control is only part of the development equation. A project must also connect to the electric grid, and increasingly, BESS interconnection is one of the biggest sources of schedule, cost, and contractual risk. Key Takeaways This article is Part 3 of our Battery Storage […]
Navigating Director and Officer Liability in Times of Financial Distress
Director and officer liability increases sharply when a company is in financial distress. Decisions that would draw little attention in a healthy business can later be challenged by creditors, shareholders, bankruptcy trustees, and regulators as breaches of fiduciary duty, fraudulent transfers, or oversight failures. Understanding where that exposure comes from, and how to manage it, […]
Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey
For developers pursuing battery energy storage system (BESS) projects, finding the right property is only the beginning. BESS site selection is as much a legal and transactional exercise as a real estate decision, with risk analysis central to the project’s ultimate success. Key Takeaways The core questions for BESS site selection in New York and […]
What Business Owners Get Wrong Before Meeting a Litigation Attorney
What should you expect when meeting a litigation attorney about a business dispute? You should expect to describe the dispute in your own words, hand over the most important documents, flag any deadlines or immediate threats, and leave with a clearer picture of the problem, what information is still needed, and the likely next steps. […]
Arbitration vs. Litigation vs. Mediation: What New Jersey Businesses Should Know Before Signing a Contract
Arbitration resolves disputes privately before an arbitrator whose decision is usually final, while litigation resolves them in court with full rights of appeal. Whether a business ends up in arbitration or litigation is often decided when it signs the contract, long before any dispute arises. Key Takeaways When facing a contract dispute, carefully consider your […]
Can You Own Part of a New Jersey Business Without a Written Agreement?
Can you own part of a business in New Jersey without a written agreement? Yes, it is possible. Under New Jersey’s Uniform Partnership Act, a partnership can arise when two or more people carry on a business as co-owners for profit, whether or not they ever intended to form one. Ownership doesn’t necessarily depend on […]
No Aspect of the advertisement has been approved by the Supreme Court.
Results may vary depending on your particular facts and legal
circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
