United States: NJ Law Grants Tenants Implied Right To Attorney’s Fees Under Residential Leases

New Jersey's residential landlord/tenant statute has long been considered "tenant-friendly." This trend continues with the recent enactment of Assembly Bill 3851 signed into law by Gov. Chris Christie on January 17, 2014. Under the legislation, any residential lease that provides that the landlord may recover attorney's fees and costs from the tenant for a breach of the lease will be construed by the courts to contain an implied reciprocal covenant in favor of the tenant. The law also requires that residential leases executed after February 1, 2014 contain additional language pertaining to such a covenant. The law does not apply to New Jersey commercial leases.

Most standard residential leases used in New Jersey include a clause entitling the landlord to collect attorney's fees or expenses, or both, which are incurred as a result of the failure of the tenant to perform its obligations under the lease. Now those New Jersey residential leases will be interpreted to afford the tenant a parallel right against the landlord if the tenant successfully defends the action or summary proceeding brought by the landlord. All residential leases as of February 1, 2014 must contain the following provision in a bold-face type with a font size one point larger than the point size utilized in the balance of the lease (an 11 point-minimum font size):

The covenant cannot be waived. Any attempted waiver in a lease will be deemed by the courts as void against public policy. Recoverable "expenses" include those related to the litigation, including attorneys' fees, court costs and witnesses, but the statute specifically excludes personal expenses such as travel, reimbursement for missed work or child care. Successful tenants may recoup the awarded expenses either as money damages or as a credit against future rent. Notwithstanding the implied covenant, a tenant who pays all back rent into court prior to the entry of final judgment, and whom the court finds presented no meritorious defense to eviction other than the payment, will not be considered to have "successfully defended the action" in order to be awarded attorney's fees or expenses. In this latter instance, the landlord will still be able to recover attorney's fees and costs to the extent provided for in the lease.

Although the law does not expressly state the legal consequence to residential landlords who fail to include the additional statutory language in their leases going forward, it is anticipated that the courts may refuse to permit landlords to enforce their own attorney's fees-recovery rights under the lease against tenants in such cases. It is therefore recommended that residential landlords with new and renewing leases have their leases reviewed and revised to comply with the new law.

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