HUD REGULATIONS PREEMPT NJ ANTI-EVICTION ACT
In a recent Superior Court decision, the New Jersey court in Summit Plaza Assocs. v. Kolta explored the parameters of the federal preemption doctrine in the context of a landlord/tenant action. The Court held that the United States Department of Housing and Urban Development (HUD) regulations expressly preempt state law and that preemption is warranted as the regulations served similar federal and state interests in maintaining the availability of low-income housing. HUD’s Section 8 program was designed to enable the government to assist low income families with their rent by paying a subsidy directly to the landlord.
Tenants in a multi-family apartment building were receiving Section 8 assistance from 1980 until 2002, when their income exceeded the Section 8 threshold and required them to pay the full contract rent. In 2017, HUD increased the contract rent amount and defendants refused to pay, resulting in an eviction action for failure to pay rent (N.J.S.A. 2A:18-61.1(a)) and failure to pay rent after a rent increase (N.J.S.A. 2A:18-61.1(f)).
To provide some background, in December 2016, the plaintiff landlord entered into a twenty-year “Project-Based Section 8 Housing Assistance Payments Renewal Contract for Mark-Up-to-Market Project” (HAP contract) with HUD. Under the HAP contract, the operation, management and maintenance of plaintiff's property is subject to HUD's regulatory control. Summit Plaza Assocs. v. Kolta, No. A-1305-18T3, 2020 WL 826405, at *1 (N.J. Super. Ct. App. Div. Feb. 20, 2020). Increased contract rents were permitted under this HAP contract, which is the maximum rent approved by HUD that a landlord is permitted to charge a Section 8 tenant (who pays thirty percent of the tenant's household income). The tenant pays a portion and HUD covers the remaining rent amount, so long as the tenant qualifies for assistance. Once the tenant’s income exceeds the permitted Section 8 threshold, the tenant is responsible for the full contract rent without any additional Section 8 assistance.
When the rent increase went into effect in early 2017, Defendants received notice of the increase and refused to pay, which resulted in the landlord filing an eviction proceeding against the tenants. This matter resulted in a settlement agreement. In December 2017, HUD approved another contract rent increase for all units in the apartment building. Defendants again refused to pay the rent increase and refused to vacate the premises, which leads us to this present action.
Prior to trial, the plaintiff moved to prevent defendants from introducing any evidence that challenged the HUD-approved rent increase, arguing that HUD-regulated apartment buildings were preempted under HUD regulations 24 C.F.R. § 246.1 and 24 C.F.R. § 246.21, and thus the approved rent increases were not reviewable in the landlord/tenant action. Defendants argued that these regulations did not apply to them because they no longer qualified for Section 8 assistance, and thus this matter was controlled by unconscionability standard under New Jersey's Anti-Eviction Act, pursuant to N.J.S.A. 2A:18-61.1(f). Further, the tenants argued that N.J.S.A. 2A:18-61.1(f) is not preempted by federal law. The trial court granted the motion, ruling that federal regulations did preempt the Anti-Eviction Act, because it was in the public interest to have preemption control over subsidized apartments to promote the economic interest and viability of HUD properties.
In the matter at hand, the Superior Court affirmed that decision and, stated that N.J.S.A. 2A:18-61.1(f) is preempted by federal law under the Supremacy Clause. The court noted that plaintiff's contract with HUD covered all the units in plaintiff's property. Thus, the court held that even though defendants no longer received Section 8 assistance, their apartment was still subject to the HAP contract and therefore governed by HUD regulations.
This decision is important to note because while the tenants claimed that the rent increase was unconscionable, the plaintiff’s HAP contract, regulated by HUD, allowed for rental increases for all units in the building, regardless of Section 8 assistance, which in turn trumped the Anti-Eviction Act. As such, after providing notice, the plaintiff was able to evict the tenants for not paying in accordance with the rent increases.
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