NJ Landlords Would Owe Tenant Attys' Fees Under New Bill

Law360 —Thursday, March 14, 2013

By Ama Sarfo

New York — A New Jersey Assembly panel on Thursday cleared a bill requiring New Jersey's residential landlords to pay tenants' attorneys' fees when tenants win disputes with landlords, following a contentious hearing in which landlord and tenant advocates squared off over the bill's fairness.

Currently, lease agreements in the state often mandate that a tenant will be responsible for the landlord's attorneys' fees and expenses if the landlord is successful in a landlord-tenant dispute, but the bill, sponsored by Assemblyman Craig J. Coughlin, D-Middlesex, would require New Jersey's courts to read an implied term in the lease that requires landlords to similarly pay up when their tenants are successful.

And if the bill passes, new residential leases that are created within six months of the legislation's passing will have to contain language outlining a landlord's attorney fee obligations to a tenant.

"In contract agreements between a landlord and tenant, there must be legal fairness for both parties," Coughlin said in a statement. "Either party can be exposed to fraudulent claims by the other party. The intention of the bill is to deter false claims by sharing the reimbursement terms in lease agreements."

But in a hearing before the Assembly Judiciary Committee, lawyers and advocates representing residential property owners, managers and the Newark Housing Authority told the committee the proposed legislation has the potential to be abused and expose landlords to needless litigation expenses.

Tracey Goldstein, an attorney for West Orange, N.J.-based Feinstein Raiss Kelin & Booker LLC, told the committee the bill is unnecessary because state law already compensates tenants for frivolous litigation filed by landlords and awards tenants double damages if their landlord improperly gives them a notice to vacate their home or wrongly holds over a security deposit.

And Elio Mena, an attorney for the Newark Housing Authority, said it doesn't really matter whether or not tenants have negotiation rights within their leases because at the end of the day, the courts are the final arbiters of landlord-tenant disputes and can strike unreasonable provisions from leases. Mena also worried that the new lease provision will subject the agency to increased lawsuits.

"Because we are such a large agency and [the U.S. Department of Housing and Urban Development] allows for lease riders, there is the possibility, a really good possibility there may be an old lease form floating around," Mena said. "That lease, in and of itself, if it has to be revised, could trigger attorneys' fees."

But Joan Pransky, testifying on behalf of citizen watchdog coalition New Jersey Citizen Action, asked the committee if they, many of whom are lawyers, would tell their clients to sign a contract that gives a landlord attorneys' fees when the client fails to fulfill his or her duties as a tenant, but doesn't give the client the same rights when the landlord fails to fulfill his or her duties.

"You would never agree to do it unless you had no bargaining power," Pransky said. "We know that these kinds of contracts are not freely negotiated."

Pransky also rejected arguments that the proposed legislation will give tenants a disincentive to settle disputes with their landlords and will increase abusive litigation filings.

"Opponents argue that about tenants, but no one argues that about landlords," Pransky said, noting that no one makes those arguments although legal provisions in leases currently favor landlords.

But Nicholas Kikis of the New Jersey Apartment Association countered that if the bill were simply about creating equity between property owners and residents, it would be a very different bill.

"The incongruous benefit in this legislation comes from the fact that a landlord can get attorneys' fees for a successful action, but a tenant can get attorneys' fees simply for successful defense," Kikis said

Now that the bill has been approved by the Assembly Judiciary Committee, the legislation will be forwarded to the Assembly speaker for further consideration, Assembly Democrats said.

— Editing by Katherine Rautenberg.

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