Sure, Rents In Jersey City And Hoboken Are Highest In Country, But Are They Legal?

HOBOKEN AND JERSEY CITY, NJ — While real estate observers were shocked last week by news that Jersey City came in first on a list of cities with the the highest rents in the United States — followed by Boston and Palo Alto, Calif., and ahead of historically pricy Manhattan — courts and cities have made it known in the last month that some of the rents aren't legal.

The rents — which Rent.com says run an average $5,500 per month in Jersey City and $4,264 in neighboring Hoboken (7 on the list), have run afoul of local towns' rent control laws.

New Jersey has the highest number of municipal rent control laws of any state in the country, an attempt to increase housing stability that harks back to the early 1970s.

The laws prevent surprise rent hikes after a tenant moves in, limiting annual increases to a certain percent each year, dependent on economic indicators like the Cost of Living Adjustment (2-8 percent).

While these ordinances in towns like Hoboken and Jersey City usually apply only to older housing, landlords of newer luxury buildings have found out this year that they're not always exempt.

That's because starting in 1987, the developers of new buildings in New Jersey had to file an exemption from rent control for 30 years if they wanted to opt out of local laws. Decades later, the current building owners, including Wall Street firms, have been unable to locate these documents.

Two NJ Requirements To Be Exempt

In order to spur new construction, New Jersey enacted a statute in 1987 to exempt new buildings from rent control for 30 years, at which point rent control would apply to modern rents. But to get that exemption, builders had to meet two conditions:

• The developer had to file an exemption before the city could issue a Certificate of Occupancy
• Landlords had to include a provision in every tenant's lease, and still must do so, citing the rent control exemption.

Recently, owners of several high-end buildings in Hudson County, N.J., which includes Jersey City and Hoboken, attempted to raise the rents 20 percent or more in a hot rental market. This triggered the tenants to ask their cities if the increases were legal.

Upon doing so this year, some tenants — like those living in the Rivington luxury complex in Hoboken, where current rents start at $4,200 — were surprised to discover that their landlords haven't been able to locate the original exemption agreement.

According to state law, tenants who have been overcharged for rents may be entitled to damages going back years, sometimes even treble damages.

And now there's a recent legal precedent saying that if the current owners of these buildings can't find their exemption, they are subject to local controls.

No Proof Of Exemption

In a case decided on July 7, 2022 in New Jersey Superior Court, the Appellate Division, the owners of Willow Ridge Apartments in Union City — which borders Jersey City — were told that their complex, constructed just 20 years ago, is not exempt from rent control.

The current owners purchased the 24-unit building in 2015, court documents say.

In 2019, the Union City Rent Stabilization board determined that no evidence of an exemption existed. The owners fought the ruling, but the tenants and the city board prevailed.

According to the recent ruling, it doesn't matter that the owners "operated the building as exempt from local rent control ordinances" if there's no exemption on file.

Slowly, tenants in other Hudson County towns are finding that their own rents may be end up rolled back or limited.

Domino Effect

As reported by Patch last month, tenants in the Rivington apartments in Hoboken, constructed in 1999, found this year that they faced rent increases of 25 percent or more. While some acknowledge that they got good deals during the pandemic, several said they couldn't afford such drastic increases.

One mother of two kids in the local public schools reached out to Patch to say she feared having to move, and that the Rivington landlords said if she didn't pay the last rent they offered her, she might be subject to a month-to-month amount of $5,000 or more. READ MORE: Hoboken Rents Are Driving Tenants Up A Wall

The Rivington has acknowledged that they have not been able to prove that they're exempt from rent control, and said, "We are currently working through the legal process to clarify this situation."

In addition, the rider in their tenants' leases in Hoboken did not actually say the building was exempt from Hoboken rent control laws.

After Patch covered the story last month, the city and the Rivington came to an agreement this past Thursday. Tenants got this letter calling some of the prospective increases "egregiously high" and saying some tenants would get credit for overpayments:

Broader Implications

However, one tenant in a high-end Jersey City building — who is among a group fighting their own increases — pointed out that while the Hoboken tenants may be happy they "won something," they may be tricked into signing new leases that benefit the owners.

Tenants overcharged under rent control may be entitled to collect triple damages in New Jersey, and possibly have their rents revised based on the base rent from years ago (with increases and vacancy decontrols along the way).

A Hoboken-based tenant advocate had a similar reaction to the Rivington letter this week, Tweeting on Monday:

"Credit for overcharges since Jan 1, 22 only? Our rc laws allow for 2yrs retroactive refund (& the state allows for 6.) There should be determination of what the legal rents are calculating based on initial 1999 rents when the bldg came online."

The implications of rolling back rents in cities like Hoboken and Jersey City may be felt during tax collection time, as some buildings constructed since the 1990s made Payment In Lieu of Taxes agreements with cities, based on a percentage of the rent.

Thus, a city charged with enforcing rent control may stand to lose tax dollars if it swings too far in favor of tenants.

However, a city that doesn't provide some protections stands to lose its economic diversity.

"They're trying to make Hoboken a family friendly town, but how can it stay family friendly?" asked the Rivington mom of two last month, before she got word of her possible rollback.

Hoboken, with its dark history of tenants being burned out of buildings during the gentrification of the 1980s, retains a lawyer whose job is to help tenants and landlords navigate the laws (find out more here). Jersey City has an office of tenant/landlord relations, which can be found here.

HOBOKEN also has several volunteer tenant advocates who have pushed back on changes to the city's Rent Control Ordinance over the years, although two of those advocates were removed this year from the city's rent board after the current administration did not support them.

One Tenant Has A GoFundMe

After publishing three stories on the possibly unlawful rents last month, Patch received a number of emails from tenants and lawyers in both Jersey City and Hoboken who cited rent increases this year as high as 40 percent. Some are in buildings that may fall under rent control like the Rivington, and others may not — but may run afoul of state law instead.

That's because New Jersey law says that rent increases must be "conscionable." While there is no percent spelled out in the state law, tenant advocates say 25 percent is a rule of thumb if the case were to go to court.

However, not all tenants live in luxury buildings where neighbors can band together and pay for a lawyer to fight increases.

Just this week, advocates for a longtime tenant of a smaller building in Hoboken posted a GoFundMe, saying landlords want to raise the man's rent more than $3,000 per month, and he needs funds to stay in his fifth-floor walkup.

Advocates say if he loses in court, the matter could have broader implications for other tenants.

On the other side, a lawyer told Patch he has a case in court in which his Hoboken tenant stands to win triple damages because of overcharges going back more than a decade. But that's because this tenant was able to afford a lawyer.

Tenants in Hoboken contact the city's rent control board to find out their legal rent and whether their building is subject to rent control/stabilization.

Jersey City: Millions

Meanwhile, a tenant in Jersey City said this week that the rent overcharges in his large apartment complex may end up climbing into the millions — a matter that may decided soon.

That would good news for the tenants, bad news for the firm that purchased his property, and possibly bad news for the city's tax coffers.

The tenant said that his neighbors have been fretting about the increases — include teachers, retired nurses, and single moms.

What do you think? Comment below or email Patch here.

Prior Stories

• READ MORE: Hoboken Rent Increases Are Driving Tenants Up A Wall (July 13)
• READ MORE: Hoboken Luxury Building Tenants Learn Rent Hikes May Be 3X Legal Rate (July 20)
• READ MORE: Rivington Rent Hikes Reduced In Hoboken (July 28)