NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2027-19
NC COMMONS 2016 U.R., LLC,
Plaintiff-Respondent,
v.
RAYMOND KELLY,
Defendant-Appellant. _____________________________
Submitted February 1, 2021 – Decided March 16, 2021
Before Judges Rothstadt and Susswein.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. LT-022327-19.
Rutgers Law School Civil Justice Clinic, attorneys for appellant (Victor Monterrosa and Norrinda Brown Hayat, of counsel and on the briefs; Akua Dawes, Kamaria Guity, Sabah Abbasi, Jaedon Huie, admitted pursuant to Rule 1:21-3(b), on the briefs).
The Law Office of Jeffrey R. Kuschner, attorneys for respondent (Lindsay R. Baretz, on the brief).
PER CURIAM In this residential tenancy action, we address when to fix the effective date
for a reduction in rent for a tenant whose rent is subsidized by a federal program
and who experiences a reduction in income. For the reasons stated in this
opinion, we hold that where an interim recertification of income is completed,
the effective date under federal regulations is the date of the action that caused
the interim recertification, such as a tenant's loss of employment, even if the
tenant delays reporting the decrease in income to his or her landlord.
The tenant, defendant Raymond Kelly, appeals from the Special Civil
Part's October 30, 2019 judgment of possession that was entered after the trial
court determined there was unpaid rent owed by defendant to his landlord,
plaintiff NC Commons 2016 U.R., LLC, under a lease that required his rent to
be aligned with his income because he participated in a federal rent subsidy
program. On appeal, defendant contends that the trial court did not correctly
calculate his rent in accordance with federal law and that it "erred" in
determining that rent was legally due and owing under the Anti Eviction Act,
N.J.S.A. 2A:18-61.1 to -61.12, because defendant violated the applicable federal
regulations by not reducing his rent retroactive to the first of the month after he
experienced a reduction in his income.
A-2027-19 2 Defendant, a 65-year-old disabled senior citizen, rented an apartment from
plaintiff in 2017 at its building located in Newark. There are 376 units in
plaintiff's building. All of its tenants participate in subsidy programs. For that
reason, recertifications of program eligibility and income are performed
annually for all tenants to ensure their rent is limited to thirty percent of their
income. The federal government pays the balance of approved market rent.1 As
discussed in more detail below, because a tenant's rent is tied to his or her
income, the program required tenants to report, among other things, any increase
in their income during their leases' term, which would then trigger a
recertification process to determine whether they were still eligible and if so , to
calculate a new rent based on the additional income.
Prior to becoming unemployed in February 2019, defendant had worked
as a construction worker through a temporary employment agency. In the fall
of 2018, he completed the recertification process and based on his verified
1 As defendant's counsel explained, defendant participated in the Section 8 housing choice voucher program. That program "provides financial assistance to eligible individuals so that they may rent privately owned housing. An individual deemed eligible for Section 8 housing assistance is issued a housing choice voucher which verifies eligibility for assistance and that money is being set aside to assist the individual with paying his or her rent." Pasquince v. Brighton Arms Apts., 378 N.J. Super. 588, 591 n. 1 (App. Div. 2005). A-2027-19 3 income his monthly rent was fixed at $681, effective December 1, 2018 as stated
in his one-year lease with plaintiff.
Defendant was employed for most of 2018, but at the time defendant
renewed his lease in 2018, he had been unemployed for two months and was
relying solely on his social security disability benefits for income. Thereafter,
defendant returned to work on a temporary basis and remained employed
through February 2019. He stopped working in February 2019 but received
compensation from his employment through March 2019. Afterward, he only
had his social security disability income to rely upon.
In September 2019, as also discussed in more detail below, defendant
underwent his annual recertification and simultaneously an interim
recertification because he advised plaintiff that he had stopped working in
February 2019 due to his medical issue. Based on that information, plaintiff
recalculated defendant's rent and effective October 1, 2019, it was reduced to
$252 per month. At the time, defendant was in arrears in the payment of his
prior rent for approximately seven months.
Prior to plaintiff filing its complaint in this action, on several occasions
during 2019, defendant had conversations with representatives of plaintif f in
which he stated that he was having financial difficulty and did not "have the
A-2027-19 4 money" due to funeral expenses he was incurring for his late brother. During
those conversations, defendant never stated that he was no longer working nor
did he request an interim recertification.
Because defendant had not paid his rent on multiple occasions when due,
prior to his recertification, on July 25, 2019, plaintiff filed its complaint 2 in this
action seeking possession of the premises. Evidently, 3 the parties went to court
in September 2019, and trial was scheduled for October 30, 2019. Before the
parties returned to court, and still in September, defendant met with plaintiff's
representative to compile paperwork for his annual recertification. They
handled his interim recertification at the same time. That process resulted in
defendant's rent reduction effective the first of the month following
recertification, which was October 1.
Although the parties resolved the issue of defendant's rent going forward,
by the new trial date they had not resolved the alleged outstanding rent. Two
days before the scheduled trial date, defendant filed a motion to dismiss the
2 Contrary to the requirements of Rule 2:6-1(a)(1), defendant has not provided us with a copy of the pleading in his appendix. 3 We reach this conclusion based upon the undisputed trial testimony of plaintiff's representative and defense counsel's statements at trial.
A-2027-19 5 complaint based upon plaintiff's alleged violation of federal law and regulations
governing defendant's tenancy.4
At trial, the court first addressed defendant's motion. After considering
the parties' arguments and citing to Housing Authority of Passaic v. Torres, 143
N.J. Super. 231 (App. Div. 1976), the trial court acknowledged that a landlord
subject to the federal regulations could not seek from a tenant rent that does not
comply with the regulations because it is not "legally due and owing." It then
concluded that it could not determine whether the rent claimed by plaintiff was
due and owing until it had heard the testimony of the parties, so the matter
proceeded to trial.
During the trial, plaintiff's representative Geraldine Bruce testified as did
defendant. Bruce, who was the assistant property manager for plaintiff, testified
to the rent owed and as to the manner that plaintiff addressed recertification of
tenants under the federal program. According to Bruce, plaintiff typically
started to speak to tenants about the recertification process when they come in
to pay their rent in advance of a new lease term. And, in anticipation of those
4 Here, again, contrary to Rule 2:6-1(a)(2), defendant has not provided us with a copy of the motion or any supporting submissions. Because the court's decision referred to the motion to dismiss, it should have been included. R. 2:6- 1(a)(2). A-2027-19 6 discussions, plaintiff sends notices to tenants beginning "one hundred twenty
days in advance," and thereafter ninety, sixty and thirty days "before its done."
Sixty days before, plaintiff would seek to secure employment verification
through its service provider in anticipation of recertification.
As Bruce explained, the recertification is typically "constrained to the six
pay periods prior to the recertification" and for that reason "[t]hey used the last
six pay stubs." Ultimately the tenant's rent is calculated by "a certified
occupancy specialist" who is "certified by the federal government to calculate
the tenants rent." The rent is then approved by the Housing and Mortgage
Financing Agency (HMFA). And, upon receipt of the certification or approval,
a letter is sent notifying the tenant and requesting that they come in to sign the
lease. She explained typically when a tenant requests an interim recertification,
plaintiff conducts the same employment verification and reviews submissions
made by the tenant demonstrating their income as verified by their employers
confirming their income or stating that the effective date of their termination or
change in hours of employment.
This was the procedure that she followed with defendant leading to the
execution of the December 2018 lease. In anticipation of defendant's
recertification, plaintiff received a handwritten statement from defendant listing
A-2027-19 7 his wages. Bruce explained the difficulty she experienced in verifying his
income in 2018 and how she ultimately confirmed his income through an
employment verification system.
Bruce then testified to defendant's subsequent visits to the office
complaining that "he didn't have the money" because he had to pay for his
brother's funeral. She said these visits happened almost every other day. She
confirmed that defendant never asked for an interim recertification. Nor did he
bring any evidence of his then current income or verification that he had stopped
working. Defendant never submitted such documentation to plaintiff prior to
September 2019.
According to Bruce, in September 2019, defendant told her he was not
working because of his need for a foot operation. Plaintiff then "removed his
income" from employment in its calculations and relied only on his social
security benefits, when it conducted both an interim and annual rectification
because the information he provided revealed an earlier loss of income.
When the interim and annual recertifications were completed, defendant's
rent was lowered to $252 per month effective October 1, 2019, because the
recertified rent goes into effect the first of the month after it is completed. So
had defendant submitted the information in support of a request for
A-2027-19 8 recertification showing his loss of income earlier, his rent would have been
reduced on the first of the month thereafter.
Bruce also confirmed the months for which defendant had not previously
paid rent during 2019. She noted that of those months he paid rent on March
4th, April 3rd, and June 3rd. At the end of September 2019, defendant's
outstanding rent balance was $3,697.
In defendant's testimony, he initially addressed his employment history.
He explained that he was unemployed since February 2019 and before that was
doing work through various temporary employment agency which he began in
approximately June 2017.
Defendant then addressed his income. He explained that since his
unemployment he received social security benefits in the amount of $956.00 per
month.
According to defendant he pursued an interim recertification in October
2019 because he "stopped working in September." At that time, he went to
plaintiff's office and brought his last six pay stubs. Despite his previous
statement that he stopped working in September, defendant explained that in
February 2019 he stopped working because he went to his "foot doctor" who
said he needed surgery and was then told by the employer secured by the temp
A-2027-19 9 agency that he should not return to work. He has never been employed since
then. Defendant had the anticipated surgery in September 2019, which
prompted him to notify plaintiff he had stopped working.
Defendant acknowledged that he understood his lease required him to
report any changes in household income to his landlord. He confirmed that when
he moved into the building in February 2017, he only had income from social
security and was not working. As revealed in his 2018 recertification, he worked
during 2017 but had not informed plaintiff of his change in income. Defendant
maintained that he did not report that 2017 income, but that he told plaintiff's
representatives that he was working during that period.
In response to questioning by the court, defendant confirmed that after he
was not allowed to return to work in February, he did not advise plaintiff. He
also confirmed that when he spoke to plaintiff's representative he told them that
he "was paying [his] rent but . . . had two brothers pass away, one this year in
January, one last year in February, got another brother that is on his deathbed
too." Defendant did not state that he had any change in income, but rather, he
explained that he had funeral expenses.
After considering counsel's closing arguments, the court placed its
decision on the record. Initially, the court made credibility determinations as to
A-2027-19 10 the two witnesses and found them both honest. The court explained that
defendant testified he stopped working in February 2019 and that the court found
him very credible and believed him. The court also specifically found that based
on the conversation that defendant had with plaintiff about his loss of his
brothers and the difficulty it imposed on him, defendant did not "inform the
plaintiff that he had a decrease in income." Instead, the court found that
defendant "informed them that he had a problem because of his brother passing
away." The court then found that plaintiff did not violate the regulations and
defendant owed $3,697 in rent. The court entered its judgment accordingly.
Thereafter, defendant filed a motion for reconsideration that the court
denied. In its order denying relief, the court again found that defendant did not
advise plaintiff he had a loss of income until September 2019 and when he did ,
plaintiff conducted an interim recertification that changed his rent effective
October 1, 2019.
Turning to the regulations and citing the "HUD Handbook 7-13(D)" the
court quoted the circumstances when a landlord can initiate interim
recertification, which included where it discovers an undisclosed increase in the
tenant's income. As to a "rent decrease" the regulations stated that the
recertification based on the decreases is "implemented effective the first rent
A-2027-19 11 period following completion of the recertification" and that "[t]enants may
request an interim recertification due to any changes occurring since the last
recertification that may affect the TTP [Total Tenant Portion] or tenant rent and
assistance payment for the tenant."
Prior to the court determining the outcome of his motion for
reconsideration, defendant tendered to plaintiff all outstanding rent. For that
reason, defendant was not evicted and remains in possession of the premises.
This appeal followed.
A party seeking to overturn a judgment of possession must demonstrate
on appeal that the judge abused his or her discretion in entering the judgment.
Cmty. Realty Mgmt. v. Harris, 155 N.J. 212, 236 (1998). We will not disturb
the factual findings of the trial judge unless "they are so manifestly unsupported
by or inconsistent with the competent, relevant and reasonably credible evidence
as to offend the interests of justice." Klump v. Borough of Avalon, 202 N.J.
390, 412 (2010) (quoting Abtrax Pharm. v. Elkins-Sinn, Inc., 139 N.J. 499, 517
(1995)). We review a trial court's conclusions of law de novo. Manalapan
Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 379 (1995).
Here, we review de novo because the trial court's determination of the rent
reduction's effective date is a legal conclusion that was based on its review of
A-2027-19 12 the U.S. Department of Housing and Urban Development's Handbook.5 See
generally U.S. Dep't of Hous. & Urb. Dev., HUD Handbook No. 4350.3:
Occupancy Requirements of Subsidized Multifamily Housing Programs (Nov.
2013) (HUD Handbook). We conclude from our review that the court erred
when it held that the reduction could only be applied prospectively and not
retroactive to defendant's loss of employment.
"Under federal law, an owner landlord is required to satisfy specific
requirements when attempting to terminate a subsidized tenancy. We have held
federal requirements to be jurisdictional prerequisites to the establishment of
good cause for eviction in state court." Riverview Towers Assocs. v. Jones, 358
N.J. Super. 85, 88 (App. Div. 2003). And, we recently held that the federal
requirements preempt the Anti Eviction Act. See Summit Plaza Assocs. v.
Kolta, 462 N.J. Super. 401, 410 (App. Div.) (finding that N.J.S.A. 2A:18-16.1(f)
is preempted by Supremacy Clause), certif. denied, 244 N.J. 145 (2020).
Whether the trial court here had jurisdiction and, if so, properly calculated
the amount due and owing as rent, turned on whether defendant was entitled to
a reduction in his rent retroactive to the first of the month following his
5 Evidently, at trial, the HUD Handbook was admitted into evidence. Like other items that were also admitted, defendant did not include copies of what the trial court considered in his appendix, again contrary to Rule 2:6-1(a)(1)(I). A-2027-19 13 unemployment, even though he never, as the trial court found, formally
requested an interim reclassification until September 2019. To determine the
answer, resort must be made to the governing regulations.
The policies and procedures governing the recertification process are
contained in the HUD Handbook. "The HUD Handbook 'is a one-source "rule
book" on the occupancy policies and procedures governing the subsidized
multifamily programs' of HUD." Kuzuri Kijiji, Inc. v. Bryan, 371 N.J. Super.
263, 265 (App. Div. 2004). The procedures set forth in the HUD Handbook are
clear and straightforward and are detailed to protect the significant property
right a tenant possesses to a subsidized housing voucher, and the federal
government's concomitant interests in ensuring an accurate and equitable
distribution of those benefits.
As explained in the HUD Handbook, one of the program's "key
requirements" is "[t]o ensure that assisted tenants pay rents commensurate with
their ability to pay." HUD Handbook, § 7-4(A). For that reason, it requires that
at least annually, landlords "must conduct a recertification of family income and
composition at least annually [and] then recompute the tenants' rents and
assistance payments, if applicable, based on the information gathered." Id. § 7-
4(A)(1). See also 24 C.F.R. § 5.657(b) (2020). And, tenants are required to
A-2027-19 14 "supply information requested by the owner or HUD for use in a regularly
scheduled recertification." HUD Handbook, § 7-4(A)(2). See also 24 C.F.R. §
5.659(b)(2) (2018). The HUD Handbook imposes deadlines for the completion
of the annual review and requirements for the landlord to commence the process
by sending the tenant various notices. See HUD Handbook, §§ 7-5, 7-7.
If a tenant fails to respond to the landlord's notice and does not provide
the required information, that tenant could lose the subsidy. Id. §§ 7-8(D)(2),
7-8(D)(3)(b). Before that happens, the landlord "must inquire whether
extenuating circumstances prevented the tenant from responding prior to the
anniversary date." Id. § 7-8(D)(4). "Extenuating circumstances" are defined as
"circumstances beyond the tenant's control." Id. § 7-8(D)(4)(a). "If the owner
determines that extenuating circumstances were present[,]" the subsidy will be
reinstated "retroactively to the recertification anniversary date." Id. § 7-
8(D)(5)(b).
The HUD Handbook also provides for interim recertifications. Unlike
annual recertifications, an interim recertification requires the tenant to initiate
the process and to provide supporting documentation. Under certain
circumstances, such as where the tenant's family's composition changes, id. §§
7-10(A)(1), (2), or the family income increases, id. §§ 7-10(A)(3), (4), the tenant
A-2027-19 15 is required to notify the landlord that a change has occurred so that an interim
recertification can be conducted. Id. § 7-10(A).
However, the HUD Handbook makes it optional for a tenant to report a
decrease in income or an increase in certain expenses that would warrant an
interim recertification leading to a reduction in rent. Id. § 7-10(B). Such
circumstances expressly include "[d]ecreases in income including . . . loss of
employment," id. § 7-10(B)(1), and "a family member . . . becoming a person
with a disability," id. § 7-10(B)(3).
A landlord is only required to complete an interim recertification "if a
tenant reports" a decrease in income, unless "[t]he decrease was caused by [the
tenant's] deliberate action . . . to avoid paying rent," id. §§ 7-11(A)(4), 7-
11(D)(1), or if the decrease is temporary, id. §7-11(D)(2). In any event, the
interim recertification must be completed "within a reasonable time, which is
only the amount of time needed to verify the information provided by the tenant.
Generally, this should not exceed 4 weeks." Id. §7-11(C). The steps a landlord
must follow are dependent upon whether they are in response to a tenant
satisfying his reporting obligation or requesting an interim recertification, see
id. § 7-12(A)(1)-(5), or if the landlord "learn[ed] that a tenant failed to report a
change in income or family composition." Id. §§ 7-12(B)(1)-(3).
A-2027-19 16 Once a landlord has completed the interim recertification requested by the
tenant or as a result of the tenant's mandatory reporting of increased income of
family composition changes, any increase in rent will become effective on the
first day of the month following the landlord's delivery of a thirty day notice to
the tenant of the increase. Id. § 7-13(C)(1). If the tenant is entitled to a decrease,
"the change in rent is effective on the first day of the month after the date of
action that caused the interim certification, e.g., first of the month after the date
of loss of employment. A 30-day notice is not required for rent decreases." Id.
§ 7-13(C)(2) (emphasis added).
However, the effective date is different if the tenant did not comply with
the mandatory reporting requirements related to an increased income or change
in family composition, see id. § 7-10(A), or if the landlord discovers any other
change that would have warranted an interim recertification without the tenant
reporting it or requesting the interim recertification. Under those circumstances,
any increase is effective "retroactive to the first of the month following the date
that the action occurred." Id. § 7-13(D)(1). Any decrease in rent "must be
implemented effective the first rent period following completion of the
recertification." Id. § 7-13(D)(2) (emphasis added).
A-2027-19 17 The requirements for conducting annual and interim recertifications were
incorporated into defendant's lease with plaintiff. Section 15 of the lease
advised that annual recertifications will begin around the first of August.
Section 16 contained defendant's obligation to report increases in income and
warned that a failure to report may increase rent to the HUD approved market
rent. And, under Section 18, defendant was obligated to pay the difference
between his rent and the market rent where he to provided false information or
"fail[ed] to report interim changes in family income or other factors as required
by [Section] 16." However, Section 16(b) made "optional" reporting a decrease
in income and provided that "[u]pon verification Landlord will make appropriate
rent reduction" unless the reduction is temporary and if there is a delay in the
rectification to determine if the reduction is temporary, but it turns out it is not,
"the rent reduction will be retroactive."
The HUD Handbook, therefore, as well as the subject lease, make the
reporting of income reduction optional to the tenant. Specifically, under Section
7-10(B), "[t]enants may request an interim recertification," and in the lease it
states a "tenant may report any decrease in income." There are no express
deadlines for reporting such decreases.
A-2027-19 18 Applying the controlling regulations and the lease provisions that are
derived from them, we first observe that there is no obligation imposed on a
tenant to seek an interim recertification when he or she experiences a reduction
in income. Both make it clear that the pursuit of that process is left to the tenant's
discretion, and when it is pursued, any rent reduction based upon information
provided by the tenant that is verified by the landlord is effective the first of the
month after the event that caused the interim recertification. Under the
regulations and defendant's lease, it is only when the tenant has an obligation to
report, such as for an increase in income, that the tenant faces dire consequence
for a failure to do so. Where he or she does not report in that situation, the
increased rent's effective date is the first day of the month after the increased
income occurred. Likewise, when there is no request for an interim
recertification and the landlord otherwise discovers the tenant's changed
financial information, the rent decrease becomes effective on the first of the
month after recertification based on the new information.
Here, there is no dispute that defendant did not request an interim
recertification until September 2019 when he already allegedly was in arrears in
the lease's rent. At that time, which was still during the lease's term, Bruce
conducted an interim and annual recertification based upon information supplied
A-2027-19 19 by defendant, sent his information to the occupancy specialist, and his rent
amount was reduced.
Under these facts, and considering the dual purposes of the regulation to
align a participating tenant's rent to his or her income while making sure only
those who are entitled to subsidies receive them, we conclude the trial court
erred by determining that the effective date was October 1, 2019, for the
decrease to which defendant was entitled after he ceased employment. As the
regulations clearly state, under these circumstances the effective date must be
the first day of the month following the event that caused the interim
recertification. That event would be defendant losing his employment in
February 2019, as the trial court found.
We are not persuaded otherwise by plaintiff's contention that, under our
holding here, tenants could wait an inordinate amount of time, even longer than
the seven months here that defendant allowed to lapse before rereporting his
decreased income. That, according to plaintiff, would be an untenable result. 6
We disagree, if as here, a tenant's reporting of a decrease is within his lease's
6 We note that plaintiff does not cite to any case law from this or any other jurisdiction to support its contention that a delay in reporting a reduction in income compels a decrease in rent effective only on the first of the month after reporting. Instead, plaintiff relies on its own interpretation of the regulations with which we disagree. A-2027-19 20 term and still within months of the event that caused the reduction in income,
especially where, as here, there was no demonstration of any prejudice or harm
to the landlord. Under these circumstances, we see nothing untenable about
fulfilling a "key requirement" of the program and applying the reduction to the
effective date as contemplated by the regulations in order to keep defendant's
rent aligned with his income.
We therefore reverse the trial court's holding and remand for a
determination as to whether, applying the correct effective date, there was any
rent due and owing to plaintiff. If so, the judgment of possession must be
amended to reflect the correct amount. If not, the judgment must be vacated.
Reversed and remanded for further proceedings consistent with our
opinion. We do not retain jurisdiction.
A-2027-19 21