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Landico Realty, Inc v. State of New Jersey

September 11, 2012


On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Middlesex County, Docket No. DC-469-10.

Per curiam.


Submitted May 1, 2012

Before Judges Baxter and Nugent.

Plaintiff Landico Realty, Inc. (Landico), a landlord, appeals from a Special Civil Part judgment that: denied plaintiff's application for a default judgment against defendant Cynthia Drude, a former tenant; dismissed plaintiff's complaint against Drude; and dismissed plaintiff's complaint against defendant State of New Jersey, Department of Community Affairs, Division of Housing and Community Resources, Housing Assistance Element (DCA). Following a bench trial, the court concluded that Landico, not DCA, had breached their housing assistance contract; and that Landico had failed to establish by competent proofs its damage claim against Drude. We affirm.

Landico owned a residential rental unit in Spotswood, New Jersey, which it leased to Drude. Drude received rental assistance under a program commonly known as Section 8, which provides funding "[f]or the purpose of aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing." 42 U.S.C.A. § 1437f(a). The program "is administered nationally by the Department of Housing and Urban Development (HUD) and in New Jersey by the DCA. HUD allocates funds to public housing authorities (PHAs), one of which is the DCA, which in turn pay a portion of low-income tenants' rent." Bouie v. N.J. Dept. of Cmty. Affairs, 407 N.J. Super. 518, 521 (App. Div. 2009).

After Drude qualified for Section 8 assistance, DCA entered into a Housing Assistance Payment Contract (HAP contract) with Landico. The HAP contract provided, among other terms, that Landico was required to maintain the unit in accordance with the housing quality standards (HQS). See 42 U.S.C.A. § 1437f

(o)(8)(B)). If Landico did not maintain the unit in accordance with the HQS, DCA could exercise remedies that included termination of housing assistance payments and termination of the HAP contract.

The initial term of the HAP contract commenced on July 11, 2006 and ended on June 30, 2007. The term was extended and the HAP contract remained in effect when the parties' dispute arose in 2009. During that year, the monthly rent was $1650, of which DCA paid $1017 under Section 8, and Drude paid the balance. In April and September of that year, DCA conducted inspections that disclosed violations of the HQS. Landico corrected the violations disclosed during the April inspection, but did not correct the violations disclosed during the September inspections. DCA suspended assistance payments effective December 1, 2009. Later that month, Landico filed a complaint against Drude and DCA seeking to recover the rent it would have been paid from December 2009 through June 2010. Drude did not answer the complaint. DCA filed an answer and the case was tried in the Special Civil Part on April 26, 2010.

Two witnesses testified at trial: Dr. Esmat Zaklama, Landico's president, and a DCA employee, Jill Corin. They disputed whether DCA legally terminated the HAP contract.

Zaklama testified that Landico owned the rental unit and that Drude had been a tenant for six years. In July 2006, Drude applied for and received Section 8 assistance. According to Zaklama, Drude made complaints about the unit and DCA requested that Landico repair a railing and fix a wire that had to be covered. He sent repair crews to the unit on three occasions. Each time, Drude refused to permit them access to the unit. According to Zaklama, "she had a big dog and she was trying to scare them off the property."

Zaklama began talking to Section 8 representatives, including a "Ms. Falcon[,]" on a weekly basis. He tried to convince Falcon to continue the subsidy but "all of a sudden, [he] found the letter of suspension." The letter, dated November 4, 2009, stated that Landico had breached the HAP contract "because [it had] failed to maintain the assisted unit in accordance with the [HQS]," and that housing assistance payments would be suspended effective December 1, 2009. The letter also stated, "Housing assistance payments will be suspended until such time as the program verifies that you have taken the proper corrective actions." DCA made the subsidized payments to Landico through November 2009 and terminated the payments as of December 1, 2009.

Zaklama responded to the November 4 letter on December 5, 2009. He handwrote the date, "12/5/09," on a copy of the letter and underlined the part of the sentence stating, "failed to maintain the assisted unit in accordance with the housing quality standards." He added, "Not true. Tenant is refusing access to contractors. We contest this . . . unilateral [action]. Please revoke the same or tell us in writing how to appeal it."

Zaklama also testified that Drude occupied the unit through April 2010, but when cross-examined about when she moved out, he responded: "I have no idea. She left on her own, without leaving keys.... I got a call from the city, there's a lot [of] garbage in front of the house.... That's how I knew that the tenant left." Zaklama testified that if he had to ...

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