Newark Room Rental Illegal?

Question

Hey BP community,

I just recently purchased a 2 family in Newark in which I inherited tenants that the previous owner had. I wasn't 100% sure If I wanted to keep them or not but decided to keep them because they were all paying on time and were good tenants.

Now here's where my problem begins;

Each tenant is occupying a bedroom. Which is pretty common in New York City, however, upon consulting with a lawyer regarding a separate issue, It's come to my knowledge that having room rentals are considered illegal in the state of NJ.

I made the decision to want to end everyone's tenancy and avoid any litigations later on down the line. But one thing is what I WANT to do and what I CAN do. It seems like I can't legally evict anyone without possibly running into trouble if the tenant decides to go that route.

Has anyone in New Jersey experienced this? I'm not sure why my lawyer at the time didn't advise me that this would potentially be an issue later on down the line and I'm also not sure why the city even issued a CO. Any advice or recommendations on lawyers that specialize in this is greatly appreciated .

Shawn Mcenteer · Answer

@Hady Farag Newark NJ has some of the strictest rent laws in the nation,  it is very tenant friendly.    Eviction process is very difficult.   Towns will issue a CO unless people are living in areas considered illegal.  You can rent by room in NJ, it tends to be a town by town rule saying if you can or cannot but not exactly easy to prove one way or another. Newark has very specific laws and regulations I would look for someone very familiar with the city.   I have a very good real estate attorney but for the reason above I never close deals in Newark so I cant say that he is or is not the right person for the job.

Account Closed · Answer

could an option be putting just one of their names on the lease and having only them pay you (they obviously collect $$ from the others)

Shia Islam · Answer

@Hady Farag Just came across your post. I own a single family in newark since 2020, not too far from university heights, and I rent by the room. Rent by the room is very common in Newark, but I am not sure the legality of it with the municipality. Although, when I did a cash out refinance in 2021 I had to put everyone in one lease to be approved by my lender underwriters. All the tenants agreed. I had one main lease holder and everyone else are sub-lessees. I believe each bank wants a specific structure of the lease thats appropriate to them to approve loans so if you are direct with your loan officer, he/she should tell you how to get approved with the underwriters. I know this doesn't answer your question, but it is useful information to share. I still rent by the room for that property just so i can yield a higher rent roll but i make sure any new room renters are aware of the single lease with everyones name in it. If you do find more information with Newark policies with room renting, I am curious to know. Good luck.

Jonathan R McLaughlin · Answer

@Mike Ost check with attorney obviously but usually those laws are meant to prevent boarding houses. You can likely solve by having them on one lease and jointly and severally responsible for payment. Pretty common in places where there are lots of roommate arrangements.

How they arrange the rooms is up to them.

Hady Farag · Answer

Salaam! Appreciate your response @Mohammed Rahman.

I discussed with an attorney that specializes in evictions and it doesn't seem to be as big of an issue as I think. The property is located in University Heights so you're right, most of my tenants are students from Rutgers & NJIT. Hoping the process doesn't get complicated.

Mohammed Rahman · Answer

Salaam @Hady Farag - sorry to hear about your tenant issue in NJ! Also you're right, it is very strange for your attorney to not have brought this up prior to closing and only mention it after the fact (maybe it's not as big of an issue as we think, or perhaps the attorney just wanted to close a transaction?)

I personally don't feel this is a glaring issue, although it may be against NJ law, a lot of people still do it (especially in college towns). The city may have issued the CO for the property but they don't necessarily verify whether or not each room is being rented individually.

If I'm in your shoes, I would look up 'eviction attorneys' in your part of NJ. They're specialized for these matters and usually work off of a flat fee, so much cheaper than hiring a regular attorney.

Kevin Manafi · Answer

Hi @Hady Farag, as others have mentioned above, renting-by-the-room tends to have different regulations on a municipality-by-municipality basis (at least in NJ). In general, in my experience, I have not seen this be a big issue, and it is of course extremely common. It's definitely understandable to be hesitant in issues relating to tenant law these days, so I would recommend consulting with a qualified attorney specializing in Landlord/Tenant law in your state to put your mind at ease.

Hady Farag · Answer

Hey @Shawn Mcenteer - Thank you for sharing. I'm in talks with a few attorneys at the moment but I'm always open to getting a 2nd opinion on this situation. I'll send you a DM if that's alright with you

Hady Farag · Answer

This is actually something that came across my mind this week! Glad to hear you mentioning it. Might be the best way to avoid any issues going forward.

Newark Room Rental Illegal?

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