This article is intended as a brief guideline to folks wishing to invest in real estate that is subject to a tenancy. In laymanâ€™s term, this means purchasing a residential property that has at least one rental unit. A multi-family property that is occupied by an existent tenant is attractive to some home buyers who are frightened by the long-term mortgage commitment, or rather the possibility of not being able to keep this commitment at some point.
First, an owner-occupied multi-family property is a solution for those with little savings, who have little in reserve for the rainy day. The tenant, provided that they pay their rent, will cover the mortgage payment, giving you, the homeowner, some breathing room to recover from a tough financial situation.
If you are considering purchasing a home in New Jersey that will have a tenant, you should become familiar with various landlord tenant issues that regularly come up and which are applicable irrespective of whether the landlord was aware of them. You should, at least initially, consider investing into legal counsel.
You must know that in residential tenancies, a lot is governed by a lease between the landlord and tenant and a lot more is directed by law. The lease must be clear and unambiguous. Standard lease agreements (recommended) are available. Never leave anything at a handshake.
Statutes governing residential tenancies are written in a manner that is intended to protect the tenant against the landlord. However, it often works both ways. For example, a landlord cannot lock out a non-paying tenant, but must give them notice to quit and file a summary claim for possession in L&T court. Similarly, if a tenant must give notice to the landlord within a proscribed time, statutorily 30 days, unless specified otherwise, of their intent to move out they must provide such notice or waive their right to recover double security deposit. However, a breach of notice is almost never forfeiture. For example, if a tenant leaves without notice, that doesnâ€™t mean that the landlord is entitled to keep the security deposit. But if there is no notice, it also doesnâ€™t mean that the tenant is entitled to doubling of security wrongfully held, especially if tenant also damaged the premises.
As a residential landlord, you will need to remember that security deposits are exactly that. Under N.J.S.AÂ 46:8-21.1 a security deposit must be deposited in a separate interest bearing account and the tenant must be notified within 30 days of the existence of such account. Failure to keep to this important rule, may result in a forfeiture of a claim by landlord that would have otherwise been valid. For example, the landlord would not be able to maintain an action for double rents if the tenant notified the landlord of intent to leave but did not actually leave as promised.