In New Jersey, most residential tenants are not required to move out at the end of the lease term.* Surprised? So are many attorneys and realtors. In fact, I typically need to repeat this statement a few times while it sinks in. “Most residential tenants are not required to move out at the end of the lease term.” Why? New Jersey law. Specifically, “No landlord may evict or fail to renew any lease of any premises covered by…this act except for good cause….” N.J.S.A. 2A:18-61.2 (emphasis added).
Quite simply, under New Jersey law, most residential tenants have an ongoing right to continue renting a property until there is “good cause” to terminate the lease. These “good cause” grounds for eviction are specified in N.J.S.A. 2A:18-16.1, and, of course, include nonpayment of rent among other common sense causes, such as continuing to disregard material lease terms or causing excessive damage to the residence after proper notice. However, without such statutory good cause, the lease must renew as per its terms. And, if the lease does not have terms for renewal, then the lease converts to a month-to-month lease, with all other terms remaining in full force and effect. N.J.S.A. 46:8-10. The lease and the tenant’s right to remain in possession continue, indefinitely, until the landlord has “good cause” to terminate. New Jersey law has detailed procedures for making reasonable changes to renewal lease terms, but these procedures do not allow termination of the lease without good cause. N.J.S.A. 61.1(i).
Examples? 1) A 12-month lease has expired without being renewed: the tenant does not automatically have to leave, and the landlord cannot tell the tenant to leave just because the term expired. 2) Landlord wants to sell an investment property in a year, and has a tenant sign a 9-month lease. In month 8, landlord demands that the tenant leaves by the end of the 9th month, so that landlord may list the home for sale. Nope – the tenant does not have to automatically leave after the 9-month term, and the landlord cannot tell the tenant to leave just because the lease expired. 3) Tenant signed a 12-month lease, which is about to expire. The landlord’s BFF is looking for a rental, and the landlord would rather rent to her. Nope – the landlord cannot make the tenant leave just because the term is ending and the landlord wants to help her BFF. In all of these examples the landlord must renew the lease, unless the landlord has “good cause” to terminate and evict, such as nonpayment of rent.*
I frequently witness misunderstandings regarding this concept of leases “expiring,” including while advising on real estate transactions, representing real estate investors, and while mediating landlord-tenant evictions in Superior Court. In a difficult real estate market, some homeowners have been encouraged to rent surplus property for a year or so and then re-attempt listing the home for sale at a later date, hoping market conditions have improved. Perhaps an elder has been moved into assisted living, or a person’s job is relocated, and his or her home is sitting vacant.
If these homes do not sell quickly, these discouraged homeowners are oftentimes advised to rent for a year, and are informed that their tenant will have to leave at the end of the year, and that they can then return the deposit, have the house cleaned, and list it for sale. In most circumstances, this advice violates New Jersey law. As per N.J.S.A. 2A:18-16.3, the landlord may not terminate or fail to renew the lease, and the Court may not evict, unless the landlord has good cause in accordance with N.J.S.A. 18-61.1. Without good cause, the tenant may stay subject to the terms of the lease. In fact, any lease provision which attempts to waive this tenant protection, and which provides that a lease may be terminated or not renewed without good cause, must be found by the Court to be against public policy and unenforceable. N.J.S.A. 2A:18.61.4.
Owners of rental property who are listing the home for sale often want the home vacant. Buyers of rented property often want the tenant to leave by closing. This scenario is governed by N.J.S.A. 2A:18-61.1(l)(3), which allows the owner of a residence with 3 or fewer residential units to terminate a tenant’s lease where the owner seeks to personally occupy the unit, or where the owner has contracted to sell the unit to a buyer who seeks to personally occupy the unit, and the contract for sale calls for the unit to be vacant at the time of closing. However, terminating a lease for this “good cause” requires that the term of the lease has expired (such that it is ending or is in month-to-month status), and requires that the tenant be given at least two full months of advance written notice that the lease will terminate and the tenant must vacate. N.J.S.A. 2A:18-61.2. In this circumstance, the owner or new buyer must personally occupy the premises for at least six months, or the owner is liable to the former tenant for three times the tenants damages plus the tenant’s attorney fees and costs of suit. N.J.S.A. 2A:18-61.6(b). Such tenant-occupied real estate sales have added complexity and risk and must be properly navigated.
*However, there is an exception to this restriction on non-renewal. Some owner-occupied properties differ. If the owner of a property resides at the property, and has no more than two additional rental units, such tenants may be required to vacate the rental unit at the end of the lease term, provided proper notice is given. N.J.S.A. 2A:18-53(a). (Laws differ for hotels and seasonal rentals, as well).
However, for most New Jersey residential real estate investors, the termination and renewal of leases is strictly governed by New Jersey law, and the circumstances of termination and/or renewal quickly touch upon additional New Jersey statutes, such as those pertaining to a tenant’s decision to vacate, how to modify leases, or the detailed requirements for providing various notices to tenants. When evaluating the selection of tenant, or even the choice to rent or sell a property, it is not legally sound to assume a residential tenant will leave at the end of a lease term.