New Jersey Rent Increase Rules for Landlords

New Jersey has no statewide cap on rent increases. If your town has a rent control or rent leveling ordinance, that ordinance sets the maximum increase, the notice period, and how to apply for more. You can raise rent only at the end of a lease term, after serving a written notice to quit and notice of the increase. The Anti-Eviction Act bars unconscionable increases but excludes owner-occupied premises with no more than two rental units, where local rent control may still apply.

Does a rent control ordinance cover your unit?

The state Department of Community Affairs (DCA) says New Jersey has no law that sets or controls rents, but municipalities may adopt rent control or rent leveling ordinances, enforced by local boards. Each ordinance sets its own cap and its own list of covered buildings, so the same increase can be legal in one town and illegal in the next.

Examples of how local caps differ:

To check coverage, contact your municipal clerk or the local rent board, as DCA recommends. Ask for the current ordinance, the allowable increase for your lease dates, and any registration or filing forms.

Some housing is outside local rent control no matter what the ordinance says. DCA lists developments owned or subsidized by HUD and projects financed by the New Jersey Housing and Mortgage Finance Agency, whose rents are set under those programs.

The new construction exemption

State law limits how far local ordinances can reach new buildings. Under N.J.S.A. 2A:42-84.2, the parts of a rent control ordinance that cap regular increases do not apply to a multiple dwelling (a building with four or more rental units) built under a permit issued after the 1987 law took effect. The exemption lasts for the amortization period of the initial mortgage or 30 years after the certificate of occupancy, whichever is shorter, or 30 years if there was no initial mortgage. The amortization period is the time regular payments would take to repay the loan and interest in full, even if the mortgage requires a lump-sum payoff sooner.

The exemption is not automatic. You must:

1. File a written claim of exemption with the municipal construction official at least 30 days before the certificate of occupancy is issued, with the start date of the exemption and the number of units.
2. Give each prospective tenant a written statement that the building is exempt for the remaining exemption period, before signing a lease.
3. Include a lease provision notifying the tenant of the exemption.
4. File a notice of the end date with the construction official at least 30 days before the exemption expires.

A building of one to three units, or a rehabilitated building previously used as housing, does not qualify under this law. DCA notes that an ordinance may not cover every rental unit in town, so read its coverage section to see whether a small building is subject to it at all.

How to raise rent in a rent-controlled town

The local ordinance controls the details, but the process usually runs through the same steps:

1. Find the allowable increase. Use the board's published percentage or CPI figure for your lease dates. In Jersey City, the CPI change is measured from three months before the old lease began to three months before it ends.
2. Check filing rules. Ask the board whether you must register the building or file current rents before an increase can be collected.
3. Give the required notice. Neptune's board, for example, takes tenant complaints when an increase comes with less than 60 days' notice, and it publishes a landlord notice of rent increase form. Use your board's form if it has one.
4. Apply for anything above the cap. An increase above the ordinance limit needs board approval. Neptune's board has separate applications for a hardship increase and a capital improvement increase, plus a vacancy decontrol application.

Worked example: a Trenton tenant pays $1,500 a month. The most you can add under the 4% cap is $1,500 x 0.04 = $60, for a new rent of $1,560. If the tenant qualifies as a senior citizen or has a disability and documents it, the cap is 2%, or $30.

Raising rent where there is no rent control

Outside rent-controlled towns, there is no percentage cap, but the Anti-Eviction Act still shapes what you can charge. Under N.J.S.A. 2A:18-61.1(f), you can evict a tenant for not paying an increase only if you served a valid notice to quit and notice of increase, the increase is not unconscionable, and it complies with any other law or ordinance on rent increases.

Timing. DCA's rent increase guidance says you cannot raise rent during a lease. The notice to quit ends the current tenancy at the end of its term and offers a new tenancy at the higher rent; it does not require the tenant to move. Give notice within the time your lease sets (at least 30 days) or the ordinance sets. For a month-to-month tenant, serve a one-month notice on the day rent is due. If the tenant stays after a valid notice, a new tenancy begins at the increased rent.

Unconscionable increases. DCA describes an unconscionable increase as one so unreasonable it would shock the conscience of a fair and honest person. Courts weigh these factors, from Fromet Properties v. Buel:

• The size of the increase.
• Your expenses and profitability.
• How the current and proposed rents compare with similar rentals in the area.
• The bargaining position of each side.
• The judge's general knowledge of the market.

A tenant who thinks the increase is unconscionable can keep paying the old rent and withhold only the difference. You can then file for eviction, and DCA says you carry the burden of proving the increase is fair. If the court agrees with you, the tenant must pay the increase to stay. Keep records of tax, insurance, and repair costs and of comparable rents before sending a large increase.

Owner-occupied buildings. The Anti-Eviction Act does not cover an owner-occupied building with no more than two rental units. DCA says you can remove a tenant there at the end of the term after a notice to quit (one month for a month-to-month tenancy), Because the unconscionability rule is part of that act, it does not govern those units, though a local rent control ordinance still can.

What else changes when rent goes up

You can raise the security deposit along with the rent, but the deposit still cannot exceed 1.5 months' rent. Under N.J.S.A. 46:8-21.2, additional security collected in any year cannot exceed 10% of the current deposit. See New Jersey security deposit laws for the other deposit rules.

If the tenant refuses both the new rent and the move, the court process and filing steps are in the New Jersey eviction process. For wording and pricing an increase, see how to increase the rent. Owners with units across the river face a different system, explained in New York rent increase rules.