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In re 5-1.32

Decided: June 10, 1981.

IN THE MATTER OF N.J.A.C. 11:5-1.32 -- RENTAL LOCATION OPERATIONS


On appeal from the New Jersey Real Estate Commission.

Michels, Kole and Ard. The opinion of the court was delivered by Michels, P.J.A.D.

Michels

This appeal concerns the validity of the 1981 amendment to N.J.A.C. 11:5-1.32 promulgated by the New Jersey Real Estate Commission (Commission). The amendment, which is now in effect, substantially altered the Commission's former rules and regulations governing the furnishing of rental location listings by real estate brokers licensed in this State.

Prior to January 1, 1981, the effective date of the amendment under attack, a rental location licensee could collect the entire

fee for its listing of possible rental units or locations upon the execution of a written contract by a prospective tenant. If, however, the prospective tenant did not, after using "bona fide" efforts, find a suitable rental unit conforming to his specifications through the furnished listings, the licensee was obligated to refund all but $10 of the fee collected. Additionally, the licensee was only prohibited from referring prospective tenants to nonexistent addresses and to properties which were not for lease or rent.

Concerned over numerous complaints from customers of licensed rental location operations who claimed to have been denied refunds to which they were entitled, the Commission proposed a revision of N.J.A.C. 11:5-1.32. Under the proposed revised regulation the refund system was replaced by a system whereby, on the execution of a written contract, the prospective tenant would only pay an initial fee of $10 for the licensee's rental listing. The licensee's right to the balance of the fee would not accrue until the prospective tenant had obtained a rental unit from the listing furnished by the licensee. The proposed regulation no longer required the prospective tenant to use "bona fide" efforts to find a suitable rental unit or location. In addition, the proposed regulation prohibited a licensee from referring a prospective tenant to a rental unit without first having secured the lessor's or his duly authorized agent's consent to do so. Moreover, where such consent was verbal, rather than written, the licensee was required to confirm the consent in writing within 24 hours of its being given. No limit, however, was placed on the amount that the licensee could charge those satisfied customers who obtained a rental.

Notice of the revised regulation was published in the New Jersey Register on July 10, 1980. All interested persons were invited to submit their written statements to the Commission or to attend a public hearing on the proposed revision scheduled for July 22, 1980. The public meeting was held as scheduled, at which time oral and written statements were presented to the Commission. On October 8, 1980 the Commission adopted the

amendment to the regulation substantially in its proposed form, and notice of the adoption was published in the New Jersey Register. The regulation, as amended, became effective on January 1, 1981 and reads as follows:

11:5-1.32 Rental location operations

(a) Every licensee involved in the business of referring prospective tenants to possible rental units or locations shall enter into a written contract with the prospective tenant and give such person a copy of the contract. The licensee must disclose the manner in which the listings or units had been obtained. No licensee shall charge, accept, or receive from a prospective tenant a fee in excess of $10.00 until such time as the prospective tenant obtains a rental through the listings furnished by the licensee. If the information concerning rentals furnished by the licensee ...


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