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Barbara Street, Jennifer Street, Mckevin Shaughnessy and Elena Lopez v. Hugh Hothem


October 4, 2012


On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. DC-0617-11.

Per curiam.


Submitted May 8, 2012

Before Judges Espinosa and Kennedy.

Plaintiffs Barbara Street, Jennifer Street, McKevin Shaughnessy, Elena Lopez, and Kenn Maareveld are all long-term pre-condominium conversion tenants of properties owned and managed by defendant.*fn1 Following a bench trial, the court found that defendant had committed various violations of the Truth in Renting Act (TRA), N.J.S.A. 46:8-43 to -50, but declined to find defendant liable for violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, because the violations had not been "intentional and outrageous." Defendant has not appealed the determination that he violated the TRA. Therefore, the principal question before us*fn2 is whether defendant's conduct, including the violations of the TRA found by the trial court, may constitute a violation of the CFA. For the reasons that follow, we conclude that it may.

The court found that defendant Hothem is "in the real estate business[,]" owning approximately ten to twelve buildings in Hoboken. Plaintiffs reside in three of those buildings, which, it is undisputed, are subject to Hoboken rent control ordinances. Defendant issued new leases and notices to quit to plaintiffs from September 29 through October 18, 2010.

The notices sent to plaintiffs stated they were month-to-month tenants and that their "present lease" would be terminated. Defendant demanded possession unless plaintiffs accepted the proposed lease changes in the enclosed lease. Although all of the plaintiffs resided in the premises before any conversion of the properties to condominiums, the lease enclosed was a "condominium lease" and included a "condominium statement" that required the tenant to acknowledge that his or her tenancy "can be terminated upon 60 days' notice if your apartment is sold to a buyer who seeks to personally occupy it."

Each of the plaintiffs objected to the proposed leases, noting that they did not reside in a condominium and had never received notice of conversion. Plaintiffs and their counsel protested provisions of the new leases to defendant and his counsel from September 30 through November 24, 2010. Defendant responded directly to plaintiffs Lopez and Maareveld in October and November 2010. Thereafter, defendant issued a second notice to quit to plaintiffs for their failure to sign the new leases on December 21, 2010, giving them a move out date of January 31, 2011. Plaintiffs filed a complaint challenging the validity of the leases and seeking statutory penalties and fees on January 8, 2011. Thereafter, defendant filed complaints against plaintiffs, seeking to evict them for failing to sign the leases. The eviction complaints were voluntarily dismissed thereafter.

The TRA provides in part:

No landlord shall offer to any tenant or prospective tenant or enter into any written lease after the effective date of this act which includes a lease provision which violates clearly established legal rights of tenants or responsibilities of landlords as established by the law of this State at the time the lease is signed. [N.J.S.A. 46:8-48.]

Further, "[a]ny landlord who violates any provision of [the TRA], contrary to the legal rights of tenants, shall be liable to a penalty of not more than $100.00 for each offense." N.J.S.A. 46:8-47.

Following a bench trial, the trial court issued an oral opinion finding defendant violated the TRA by including "certain provisions" in the leases. The provisions the trial court deemed to be violations, and the legal basis for such violations, are:

(1) sending a condominium statement to a pre-conversion tenant when he knew or should have known that such a tenant would not be subject to the statement/notice. Such notice is only to be provided to tenancies commenced after the Master Deed for a condominium is filed, see N.J.S.A. 2A:18-61.9, and it is against public policy to ask a pre-conversion tenant to waive his or her rights by signing a condominium statement. See N.J.S.A. 2A:18-61.36.

(2) the inclusion of an expired tax surcharge in the amount of rent set forth in the lease in violation of Hoboken, N.J., Rent Control Ordinance § 155-6.

(3) the provision in Clause 12 requiring the tenant to insure the landlord "against liability claims of persons who may be injured in the condominium," in violation of N.J.S.A. 2A:18-61.31 and N.J.A.C. 5:24-1.12(c).

(4) the inclusion of items in Clauses 14 and 17 such as amounts paid by the landlord to satisfy obligations of the tenant and damages to the "condominium" as "additional rent," contrary to the definition of rent established by Hoboken, N.J., Rent Control Ordinance § 155-1.

(5) the establishment in Clause 15 of one-third of outstanding rent as liquidated damages in a summary dispossess action, a penalty that has been held to be unconscionable and unenforceable. See Spialter v. Testa, 162 N.J. Super. 421 (Cty. D. Ct. 1978), aff'd o.b., 171 N.J. Super. 181 (1979).

(6) the requirement in Clause 26 that water charges be passed to the tenant in violation of Hoboken, N.J., Rent Control Ordinance § 155-6.1.

(7) the provision in Clause 27 that allows the landlord to evict the tenant if the tenant files for bankruptcy, which constitutes a waiver of the tenant's rights under the Anti-Eviction Act as a bankruptcy filing does not constitute "good cause" for eviction. N.J.S.A. 2A:18-61.1, 61.4.

The trial court found that these lease provisions violated "well-established rights" of the plaintiffs and therefore constituted violations of the TRA. The court awarded each plaintiff $100 in damages for violations of the TRA pursuant to N.J.S.A. 46:8-47, and concluded that plaintiffs were not entitled to an award of attorneys' fees, a conclusion plaintiffs do not challenge. The court described the violations as "marginal," however, because the court considered it unclear whether Hothem knew or had sufficient facts to know that the lease clauses were unlawful and viewed his focus as "to get signed leases, not to evict the tenants." The court therefore found that, despite the numerous violations of Hoboken ordinances, the lease provisions did not "give rise to a level of . . . outrageous or unconscionable conduct" that would constitute a violation of the CFA.

To recover under the CFA, a plaintiff must prove that a person has committed an unlawful practice; that he or she suffered an "ascertainable loss[;]" and that there was "a causal relationship between the unlawful conduct and the ascertainable loss[.]" Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 576 (2011). In pertinent part, N.J.S.A. 56:8-2 defines an unlawful practice under the CFA as follows:

[A]ny unconscionable commercial practice . . . in connection with the sale*fn3 or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice[.]

It is well established that "[t]he CFA is applicable to the landlord/tenant relationship." Wozniak v. Pennella, 373 N.J. Super. 445, 456 (App. Div. 2004), certif. denied, 183 N.J. 212 (2005); Ryan v. Gina Marie, LLC, 420 N.J. Super. 215, 227 (App. Div. 2011); 49 Prospect St. Tenants Ass'n v. Sheva Gardens, Inc., 227 N.J. Super. 449, 468 (App. Div. 1988); 316 49 St. Assocs. Ltd. P'ship v. Galvez, 269 N.J. Super. 481, 491 (App. Div.), certif. denied, 137 N.J. 164 (1994). However, defendant argued and the trial court found that to be liable under the CFA, defendant's actions had to rise to a level of "extreme" conduct.

The notion that "extreme" conduct is required in a landlord/tenant relationship for a violation of the CFA to occur rests upon a misinterpretation of our decision in 49 Prospect St. Tenants Ass'n, supra. There, the plaintiff tenants filed a complaint against defendant landlord, alleging a violation of the CFA, intentional infliction of emotional distress, and other torts arising from the inhabitability of their apartments. Id. at 457. Although the landlords had violated a rent control ordinance, the violation of the CFA was not premised upon a statutory violation, but rather upon the landlord's tortious conduct. Id. at 468. It was within that context that we stated, "we underscore that the Consumer Fraud Act will only apply to extreme conduct of landlords sufficient to meet the condemned commercial practices set forth in N.J.S.A. 56:8-2." Id. at 469. Because the measure of "extreme conduct" was conduct that was "sufficient to meet" the requirements of a violation of the CFA, id., 49 Prospect does not support the proposition that a landlord's conduct cannot constitute a violation of the CFA unless it rises to a level of outrageousness that exceeds that required for other violations of the CFA.

Proof of a violation of the CFA here did not require proof of any intent to deceive or to commit a prohibited act. An offense under the CFA may arise "from an affirmative act, an omission, or a violation of an administrative regulation." Gennari v. Weichert Co. Realtors, 148 N.J. 582, 605 (1997). When, as here, the alleged violation is one of making an affirmative misrepresentation, it is unnecessary to prove that the defendant intended to commit an unlawful act or intended to deceive the plaintiff. Cox v. Sears Roebuck & Co., 138 N.J. 2, 17-18 (1994); see also Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 245 (2005); Wozniak, supra, 373 N.J. Super. at 456. A person who makes an affirmative misrepresentation "is liable even in the absence of knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive." Gennari, supra, 148 N.J. at 605.

The goal of this remedial legislation is to establish "a broad business ethic," promoting a standard of conduct that contemplates "good faith, honesty in fact and observance of fair dealing." Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 472 (1988) (quoting Kugler v. Romain, 58 N.J. 522, 544 (1971)) (internal quotation marks omitted). Therefore, the CFA is "intended to protect consumers from deception and fraud, 'even when committed in good faith.'" Ji v. Palmer, 333 N.J. Super. 451, 461 (App. Div. 2000) (quoting Gennari, supra, 148 N.J. at 604). Moreover, a practice may be unlawful "whether or not any person has in fact been misled, deceived or damaged thereby[.]" N.J.S.A. 56:8-2; Gonzalez, supra, 207 N.J. at 576-77; see also Cox, supra, 138 N.J. at 17; Branigan v. Level on the Level, Inc., 326 N.J. Super. 24, 31 (App. Div. 1999).

In Wozniak, a defendant landlord argued that his increase of rent above what was permitted by a rent control ordinance was not a violation of the CFA because he did not believe the rent control ordinance applied to the premises. Wozniak, supra, 373 N.J. Super. at 457. We rejected this argument, stating:

Defendant's plea of ignorance is unconvincing. Defendant was no novice in real estate investing. . . . As an experienced owner/landlord of a building with four units, he is obliged to be aware of the local rent control ordinance . . . . [Ibid.]

Defendant here was also an experienced landlord, obliged to be aware of the local rent control ordinance and applicable statutes. He was also obliged to be aware that plaintiffs were pre-conversion tenants and that he could not demand they sign leases that required the waiver of rights as a condition of continued tenancy. His expressions of good faith, willingness to negotiate, and reliance upon counsel do not dissipate the fact, as found by the trial court, that there were violations of the plaintiff tenants' established rights. We are satisfied that, under the circumstances here, the violations of the TRA were adequate to constitute prohibited acts under the CFA. See Ryan, supra, 420 N.J. Super. at 227.

Because the trial court believed that defendant's conduct did not constitute conduct that could be the basis for a violation of the CFA, it did not consider the remaining elements of a CFA claim, i.e., an ascertainable loss and a causal connection between that loss and the prohibited conduct. We therefore reverse the order granting summary judgment and remand this matter for further proceedings consistent with this opinion. We do not retain jurisdiction.

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