New Jersey is one of many states in the U.S. that is seeing a dramatic increase in rental rates since 2019. Though it does not top the list of average rental increase by state, New Jersey still has a highly competitive rental market and property owners should keep up with the local rates in order to maximize their profits. If you plan to increase your rates, you should be aware of several laws and local trends to avoid losing valuable tenants in your area.
When Can a Landlord Increase Rent?
New Jersey landlords may not increase rent within the terms of a fixed-term lease. It may only be changed at the time of renewal or change of tenant, or in a month-to-month lease when at least one month's notice is given. Regardless of the lease term, the landlord must send a Notice to Quit and Demand for Possession and Notice of Rent Increase.
The notice effectively ends the current tenancy and invites the new or existing tenant to accept the new terms of the lease. Without this notice, the landlord may not increase the rental rate even for an existing tenant who plans to stay. The new lease can also include a new deposit, but deposits are limited to no more than 1-½ times the monthly rent.
These regulations are statewide. However, some cities and counties set their own rent control measures to further protect tenant rights. Under any circumstance, it is not legal for landlords to raise the rent as a form of retaliation or to force problem tenants out.
Is there a Rent Increase Limit?
New Jersey does not have a dollar or percentage amount that makes a rent increase illegal. However, they do prohibit rent increases that are "unconscionable or unreasonable." This is determined on a case-by-case basis and can be objected by the tenant if they believe the rent increase is too high or not within the bounds of the local market. Some city ordinances make more specific limits on what is unreasonable.
Tenants can protest a rent increase if they believe it is "unconscionable or unreasonable." If they are not willing to pay the rent increase, they can legally withhold the portion of the rent that has been increased. It then lies on the shoulders of the landlord to take the tenant to court and prove that the rent increase is reasonable. New Jersey courts look at five different factors to determine whether or not the landlord has increased the rent to a reasonable degree, or if they must lower the increase to make the tenant pay:
- The dollar amount of the rent increase
- The landlord's increasing expenses and profitability of the unit
- Comparison of rents of similar properties in the area
- The bargaining power of both landlord and tenant (to determine whether the tenant has other options or if they are being forced out)
- Whether the rent increase would "shock the conscience of a reasonable person"
Because landlords bear the burden of proof in these cases, they should be careful not to increase rents to an astronomical degree unless they have strong reason. Additionally, thorough market research should be conducted to prevent tenant discrepancies or loss of quality tenants.
Laws Regarding Notices and Late Fees
In New Jersey, a 30-day notice is required for rent increases for month-to-month tenants, and a 60-day or 90-day notice for quarterly and yearly fixed-term leases. This ensures that tenants can find new and reasonable accommodations and that they do not become trapped in rental increases that are unreasonable.
New Jersey landlords do not have imposed limits on late fees, as long as they are disclosed in the written lease. However, a five-day grace period is protected for senior citizens.
Cities in the State with Rent Control
New Jersey is one of the states in the U.S. that allows cities and municipalities to create their own laws regarding rent control, and many of the most populous cities do so to protect their citizens. Over 100 cities in New Jersey have some form of rent control regulation, including Newark, Jersey City, Elizabeth, Lakewood, Clifton City, Trenton, Passaic, Union City, Bayonne, East Orange, New Brunswick, and Camden.
Newark has the longest-standing rent control regulations, which limits rent increases for certain types of properties. Percentage increase limits are applied to all non-owner occupied 1 to 4 unit buildings and complexes. It also protects historic buildings and long-term tenants. However, these regulations do not apply to multi-unit dwellings constructed after the effective date of the current ordinance. This applies to all municipal rent control ordinances in the state of New Jersey.
How This Affects Your Pricing Strategy
New Jersey takes extra measures to protect tenant rights. As a landlord, you should be sensitive to this cultural expectation and raise rents along with the current market trends, workforce norms, and rates of other local units. If your tenant deems the rent increase unreasonable, they can protest and the burden of proof will be on you. In order to prevent discord in an otherwise positive tenant relationship, you should price your rentals competitively in New Jersey and gradually increase the rent as the housing market rises.
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