NJ Municipalities Permitted to Require Inspections and Assess Fees Against Landlords

NJ Municipalities Permitted to Require Inspections and Assess Fees Against Landlords

Authored by Thomas H. Prol, Esq.

On August 29, 2018, the New Jersey Superior Court Appellate Division issued a published opinion in Cona v. Township of Washington that allows municipalities to charge fees to landlords that are reasonably related to municipalities’ exercise of their obligation to promote the safety and welfare of their residents.

The ordinances in the consolidated appeal involving six municipalities required landlords to register their rental units and secure approvals before renting them out.  That process included having the unit inspected for code compliance and payment of an annual fee.  The appeals court upheld the trial courts’ decisions dismissing the cases, but remanded the matters to strike reference to a “licensing” scheme by several of the municipalities which was found to be verboten.

The decision stems from three cases involving challenges to six New Jersey municipalities’ ordinances requiring landlords pay fees for inspections and other approvals in order for the municipality to determine local code compliance.  The plaintiffs claimed that the defendant municipalities, all in Gloucester County, violated the New Jersey Civil Rights Act by enacting ordinances that were ultra vires; that is, that the local government exceeded their power to enact the requirements.

The trial court below granted the defendant municipalities’ motion to dismiss, concluding that the ordinances at issues were different from the ordinance the appeals court had overturned in 2015 in Timber Glen Phase III, LLC v. Township of Hamilton. In Timber Glen, the court concluded that a municipality’s power to regulate and license did not include the power to require a license and payment of a revenue generation fee because New Jersey’s Licensing Act prohibited licensing of long-term rental units.

In the present case, the trial courts held that the ordinances at issue required landlords to comply with local code requirements rather than just pay a revenue-generating fee as was the case in Timber Glen. The appeals court ruled that the fees charged under the ordinances were reasonably related to municipalities’ exercise of their regulatory and police powers. The court held that the statutory prohibition on license fees for long-term rental units did not preclude municipalities from exercising their right to require inspection of such units or to charge a fee to fund the costs of inspections and issuance of licenses, so long as those fees were not merely an attempt at revenue production. Finally, to avoid future confusion, the court remanded “for  entry  of  an  order  directing  that  the affected  municipalities  strike  the  reference  to  their  fees  as being  license  fees  and  changing  the  designation  of  any requirement for registration or inspection from being part of a licensing requirement.”

The decision of the appeals court was “published,” meaning it has statewide precedential effect on all New Jersey municipalities.  This legal alert is offered for general information and is not legal advice.