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McQueen v. Brown

October 10, 2002


On certification to the Superior Court, Appellate Division, whose opinion is reported at SYLLABUS BY THE COURT

These matters are consolidated appeals of two summary dispossess actions concerning an apartment in a building with three dwelling units in Atlantic City.

Patricia McQueen, the landlord, is the owner of a three-floor apartment building located at 517 North Ohio Avenue in Atlantic City. Pursuant to a written lease, dated August 1, 1994, McQueen leased the first-floor apartment to Steven Cook and James Brown (the tenants) at a monthly rent of $500. McQueen brought two successive actions for possession of the first floor apartment leased to the tenants.

McQueen's primary residence is in Philadelphia but, for the past twenty years, she and her mother have used the second-floor unit of the apartment building on weekends, holidays, and vacations. McQueen's apartment is fully furnished and she receives certain bills there. McQueen's cousin, Winfred Young, who does not pay rent, occupies the third-floor apartment.

In the first dispossess action, filed in May of 1999, McQueen sought to remove the tenants for non-payment of rent. At the time the complaint was filed, the tenants had been withholding rent for six months, owing approximately $3000. The tenants claimed that the rent was illegal and, therefore, unenforceable because McQueen had not obtained a municipal occupancy permit as required by Chapter 194 of the Atlantic City Municipal Code (the ordinance). The trial judge agreed, concluding that no rent was due and owing because McQueen had failed to obtain an occupancy permit before renting the apartment to the tenants in 1994 or at any subsequent time. The court dismissed the complaint for possession, concluding the lease was unenforceable.

The second action for possession was brought immediately after the dismissal of the complaint for non- payment of rent. In the second action, McQueen sought to remove the tenants under the Anti-Eviction Act, specifically N.J.S.A. 2A:18-53, claiming the unit was exempt from the Act's good cause grounds for eviction because the premises were owner-occupied with not more than two rental units. The judge dismissed the complaint, concluding that McQueen's limited occupancy of the second-floor apartment, consisting of eight or nine days per month, did not qualify the unit as "owner-occupied" under the statutory exception; therefore, she could not evict the tenants without good cause.

On appeal, the Appellate Division reversed the judgments dismissing the complaints in both summary dispossess actions. The Appellate Division concluded that the lease was not automatically void simply because the landlord failed to obtain and occupancy permit as other equitable factors must be considered, including: consideration of the public policy underlying the ordinance violated, whether voiding the lease will further that policy, the burden or detriment to the parties if the lease is voided, and the benefit which the party seeking to avoid the bargain has enjoyed.

In applying those factors, the Appellate Division found that the trial court erred by declaring the lease void and unenforceable. The court noted that the policy behind the ordinance - a process to ensure that rental housing would be safe and habitable prior to the tenant moving in -is not advanced by a rule that would declare the lease

void because the landlord did not obtain an occupancy permit where the tenants have been living in the unit for almost five years, receiving the benefits of occupancy, without demonstrating that the unit was uninhabitable. According to the Appellate Division, it would have been better for the trial court to adjourn the matter and allow the landlord the opportunity to apply for the appropriate permit and then conduct a hearing to determine if the tenants can prove that the premises was uninhabitable. The appellate panel also noted that declaring the lease void after such a long period of time results in an unjustifiable burden on the landlord, and an undeserved benefit to the tenants who were permitted to live rent free in the premises for the period the landlord did not have the permit.

In addressing the second summary dispossession action, the Appellate Division noted that the issue of McQueen's part-time occupancy of her apartment in the building and whether that was enough to enable her to be considered an "owner-occupier" was one of first impression. The Appellate Division concluded that, based on the legislative history of the Anti-Eviction statute, and the Act's plain language, the "owner-occupied premise" exception should be construed as not requiring the owner-occupier to permanently occupy or use the unit as the owner's principal residence to qualify for the exception. The amount of time that is required for the owner to live in the residence is fact-sensitive, and the court was satisfied that, in this case, eight or nine days a month was sufficient to qualify McQueen as an owner-occupier.

The Supreme Court granted certification.

HELD: The judgment of the Appellate Division is affirmed substantially for the reasons expressed in the Appellate Division opinion. Failure of the landlord to obtain an occupancy permit prior to leasing an apartment unit as required by local ordinance is not alone sufficient to void the lease. In addition, when an owner of a building of not more than two rental units maintains and personally occupies his or her own unit on a part-time basis in good faith, the unit qualifies as an "owner-occupied premises" under the exception to the Anti-Eviction Act.


The opinion of the court was delivered ...

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