March 11, 2013
Any knowledgeable commercial landlord knows that successful tenants are the key to the landlord’s own business success. However, landlords must acknowledge that, likely, some tenants will not succeed in their business endeavors. For those situations, landlords should be aware, and be prepared, regarding what the law says their options are. Commercial landlords with rental properties benefit from landlord-tenant law in New Jersey that is much more landlord-friendly than the law regarding residential landlord-tenant matters in this state. For the landlord seeking to recover back-due rent, New Jersey law offers a variety of options, including self-help.
If you are a commercial landlord, one of the potentially more difficult situations is when a tenant ceases paying rent, but does not abandon the property. You are not receiving rent from the old tenant, but cannot prepare the property for a new tenant as a result of the presence of the old tenant’s equipment and property.
One option available to the landlord in this case is the right of distraint. This means that the landlord may lock the tenant out of the property and take control over the tenant’s equipment and assets located within the property in order to recover up to one year’s back-due rent. The statutes authorizing distraint, N.J.S.A. 2A:33-1 et seq., do create some exceptions, though. A landlord cannot distrain articles of clothing, and the tenant retains a right to select items, up to $500 in value, that also become exempt from distraint. Once the landlord initiates distraint, the tenant has 10 days to pay the back-due amount of rent in full. If the tenant does not pay within 10 days, then the property will be inventoried, appraised and sold.
Landlords, if they choose to utilize the self-help option of distraint, must proceed extremely carefully. The landlord must not utilize the assistance of local law enforcement. In Callen v. Sherman’s, Inc., the New Jersey Supreme Court ruled in favor of a tenant in a distraint dispute because a local constable padlocked the landlord’s property. This “government action” triggered the tenant’s constitutional due process rights, including a right to a hearing, which the tenant had not received.
Additionally, the landlord should note that courts disfavor using distraint unless absolutely necessary. If a tenant is actively working to secure its assets and flee the property, then distraint may be appropriate. If the situation is not so immediate, landlords would be wise to avail themselves to the courts, as the cost of such an action likely will be much less than that of defending a claim by the tenant of improper distraint.
Regardless of what method you pursue to recover against a non-paying tenant, but especially if you elect a self-help option such as distraint, it is wise to consult with an experienced New Jersey real estate attorney. Your New Jersey real estate lawyer can help you ensure that your plan for recovering back-due rent meets all the necessary legal requirements and that you are safe from a lawsuit by your tenant. Contact the experienced real estate attorneys at Samuel C. Berger, P.C. to discuss your circumstances and formulate a plan. To consult our attorneys, contact us online or call (201) 587-1500 or (212) 380-8117.
Blog Posts:
Involuntary Conversion Rules May Offer Help to Owners of Condemned Properties, New York & New Jersey CPA Tax Lawyer Blog, March 8, 2012
Hurricane Sandy and Force Majeure for New Jersey Businesses, New York & New Jersey Business Lawyer Blog, Nov. 30, 2012