New Jersey Public Advocate, Commissioner of Banking and Insurance:
Tenants in foreclosed properties have rights – cannot be evicted due to foreclosure under NJ law

NEWARK – New Jersey Public Advocate Ronald K. Chen and New Jersey Department of Banking and Insurance Commissioner Steven M. Goldman today said they are looking into complaints that tenants who live in foreclosed properties throughout the state are being illegally forced out of their homes.

View Rights of Tenants During Foreclosure Brochure

Chen and Goldman also warned real estate licensees and attorneys involved in this process that they may be subject to disciplinary action affecting their professional licenses if they intentionally mislead tenants that they must move from their residence solely because the property is in foreclosure or foreclosed.

In some cases, tenants are offered “cash for keys” agreements, where they are given money to turn in their keys and move out, but the offer does not mention that they are also free to stay.  In other cases, they are just told they have to get out.

“We have had reports that tenants are being informed by real estate agents, attorneys, and others acting on behalf of a lender that they must move because their building has been foreclosed upon. We have already reached out to several of these organizations and individuals to put them on notice that their actions are illegal,” said Chen.

In 1994, the New Jersey Supreme Court held that the New Jersey Anti-Eviction Act protects tenants even when the property where they live is in foreclosure or has been foreclosed.

“A bank that forecloses on a residential property covered by this act takes the property with the tenants still in it. And, after the bank resells the property, the new owner becomes a landlord to those tenants,” said Chen.

“Real Estate Licensees have a legal obligation to their clients that requires them to be honest, forthright and to avoid misleading statements in notices that they send to the public. We expect our licensees to fulfill these obligations.” said DOBI Commissioner Steven M. Goldman. “If licensees do not completely share all information, or knowingly mislead residential tenants, the NJ Real Estate Commission will impose sanctions for this unethical behavior.”

The New Jersey Real Estate Commission (REC), a division of the New Jersey Department of Banking and Insurance, enforces New Jersey real estate licensing laws. The Real Estate Commission will issue a bulletin to real estate licensees outlining their obligations to be completely forthright with tenants. 

“The Real Estate Commission staff works every day to ensure our licensees act in a lawful and ethical manner.” said Robert Kinniebrew, Executive Director of the New Jersey Real Estate Commission. “Licensees are on notice – failure to fully disclose information will result in sanctions.”

Chen noted that tenants are often not aware that they have the right to stay in their apartment even if the building is in foreclosure.

“It is absolutely vital that tenants understand their rights,” said Chen.  “Tenants should also know that they must continue to pay their rent on time or save their rent if they do not know who or where the landlord is.” Chen warned that tenants who fail to pay their rent risk being lawfully evicted.

Chen said that his department wants to hear from any tenants who have received notification that they must vacate their apartments due to a foreclosure. 

“If you’re a renter, and you receive a notice saying you have to move out because of a foreclosure, please call us at 609-826-5070. We want to hear about these cases so that we can inform people of their rights and make appropriate referrals for help,” said Chen.

Chen said that Legal Services of New Jersey, New Jersey Citizen Action and the New Jersey Tenants Rights Organization, among others, brought the tenant eviction issue to his attention and that all three organizations have had interactions with people affected. 

“Low-income tenants are particularly vulnerable to this type of unlawful pressure to move out, and are most at risk of homelessness if they do,” said Connie Pascale, Vice President and Assistant General Counsel for Legal Services of New Jersey. LSNJ and six regional Legal Services programs throughout the state can provide legal advice or representation to eligible low-income tenants threatened with illegal eviction due to foreclosure. Tenants can call the LSNJ hotline directly at 888-576-5529.

"Unfortunately, most tenants are not aware of their rights, and can easily be convinced that they must move by unscrupulous landlords, real estate agents, or attorneys," said Matt Shapiro, Executive Director of the NJ Tenants Oranization.

"Sometimes, landlords undergoing foreclosure will take the law into their own hands and effectively lock the tenants out by shutting off vital services like heat, electricity, or water. Such self-help lockouts have been illegal for many years because of the NJTO, and the tenant can sue for damages. NJTO also fought for another law which made these lockouts and shutoffs an offense under the criminal code."

"As Citizen Action continues to be inundated with homeowners who are facing foreclosure, we are discovering that renters who occupy some of these homes are unaware of their rights as tenants and are being pressured to move out. Public education and strict enforcement of the law is essential to preventing more people from losing their homes,” said Phyllis Salowe-Kaye, Executive Director of NJ Citizen Action.

“The foreclosure crisis has been devastating to our urban communities turning back the clock on decades of neighborhood revitalization and redevelopment in a matter of months, turning once well cared for homes into the blight that we see far too often,” said Gerard Haizel, Executive Director of Episcopal Community Development. “More often than not, the tenants that are being put out represent some of the most vulnerable residents of the community with the fewest options for alternative affordable housing, forcing them into substandard housing or shelters.”

The Association for Children of New Jersey recently completed focused research on this area in its Newark Kids County 2008 report and concluded that the foreclosure problem in some Newark neighborhoods is three times the state average and that families with children are heavily affected by this trend.

Chen said community-based organizations and municipalities, through the efforts of groups like the Newark/Essex Foreclosure Taskforce, are already doing a lot of important work in this area and are critical in getting the word out to tenants, gathering information about the problem, and identifying solutions.  The Department of the Public Advocate is hoping to work with these groups as well as other state agencies in order to identify a multi-faceted response to protect the rights of tenants.

The Department of the Public Advocate is also working with the state Board of Public Utilities to assist tenants whose utilities are shut off when a landlord who has defaulted on the mortgage also stops paying the utility bills.  Tenants in this situation should call the Department of the Public Advocate for a referral to the Board of Public Utilities.

Enacted in 1974, the New Jersey Anti-Eviction Act protects residential tenants from losing their homes through no fault of their own. The Act applies whether or not the tenant has a written lease. The Act does not apply to tenants of owner-occupied homes with two or fewer rental units; units set aside for developmentally disabled members of the owner’s immediate family; and hotels, motels and guest houses.

In general, the law protects tenants against eviction from their homes as long as they pay the rent, respect the peace and quiet of their neighbors, avoid willful or grossly negligent damage to the property, and obey rules they have agreed to in writing.

The Department of the Public Advocate will distribute tenants’rights brochures throughout the state as part of its campaign to raise public awareness of this issue, said Chen. 

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