S1825

An Act concerning residential rent-to-own agreements and supplementing chapter 8 of Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. P.L. , c. (C. ) (pending before the Legislature as this bill) shall be known and may be cited as the “New Jersey Rent-to-Own Rights Protection Act.”

2. The Legislature finds and declares that:

a. Rent-to-own agreements for residential real property have become an alternative path to homeownership for many New Jersey residents, particularly those unable to secure traditional mortgage financing;

b. While these agreements can provide opportunities for homeownership, they often include complex terms and lack necessary consumer protections, leading to financial harm for tenants; and

c. There is a need for the Legislature to establish standards of transparency, fairness, and accountability in residential rent-to-own agreements to protect prospective homeowners from predatory practices.

3. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

“Equitable interest” means any accumulated interest a tenant-buyer has in a property based on payments made under a rent-to-own agreement.

“Landlord-seller” means any person or entity offering a rent-to-own agreement for residential real property.

“Option fee” means any upfront payment made by a tenant-buyer to secure the right to purchase a property in the future.

“Rent-to-own agreement” means a lease agreement for residential real property between a landlord-buyer and tenant-seller that includes an option or obligation to purchase the property through installments throughout the lease term or at a later date.

“Tenant-buyer” means a person who enters into a rent-to-own agreement with the intention of purchasing a property.

4. a. A rent-to-own agreement shall be in writing, signed by the landlord-seller and tenant-buyer, and shall contain a statement of all terms, including:

(1) the total purchase price of the property;

(2) the duration of the lease term before purchase;

(3) the amount of the option fee and whether it is refundable;

(4) the portion of rent payments, if any, credited toward the purchase price;

(5) the party responsible for property taxes, insurance, maintenance, and utility payments;

(6) the conditions under which the tenant-buyer may forfeit the right to purchase;

(7) the rights of the heirs of the tenant-buyer in the event of the tenant-buyer’s death or incapacity; and

(8) any other information that the Commissioner of Community Affairs determines necessary to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), and that is in the public interest.

b. The tenant-buyer shall have the right to obtain an independent property inspection before signing a rent-to-own agreement and, if the agreement provides an option to purchase at a later date, prior to the tenant-buyer exercising that option.

c. The landlord-seller shall provide the tenant-buyer with:

(1) a signed property condition disclosure statement, as provided for in section 1 of P.L.1999, c.76 (C.56:8-19.1);

(2) a full accounting of how payments will be applied toward ownership;

(3) a notice of any existing liens or legal claims on the property;

(4) proof of the receipt of a certificate of occupancy for the property pursuant to section 15 of P.L.1975, c.217 (C.52:27D-133), obtained no more than six months prior to entrance into the rent-to-own agreement; and

(5) any other information that the Commissioner of Community Affairs determines necessary to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), and that is in the public interest.

d. (1) A tenant-buyer shall not be required to forfeit payments made toward the purchase price of a property in a rent-to-own agreement unless the tenant-buyer has defaulted on the agreement after reasonable notice and an opportunity to cure the default.

(2) The landlord-seller shall provide a written notice of a tenant-buyer’s default on a rent-to-own agreement, with at least 30 days to cure before terminating the agreement.

e. The tenant-buyer shall have the right to record a rent-to-own agreement with the county recording office of the county in which the real property is located, in accordance with rules promulgated by the Commissioner of Community Affairs, which may include authorization for the tenant-buyer to record the rent-to-own agreement upon the execution of the agreement. The county recording officer may charge a fee for completing a recording pursuant to this subsection in an amount not to exceed $1 per page or equal to the actual costs for completing the recording, whichever is greater.

5. a. The act, use, or employment by a landlord-seller that is deceptive, or constitutes fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of information, which materially relates to the condition of the property, the terms of the rent-to-own agreement, or the ability, as permitted by the agreement, for the tenant-buyer to obtain financing towards the purchase of the property at the end of the rental period shall constitute a violation of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. A rent-to-own agreement shall not contain a provision that waives the tenant-buyer’s rights under P.L. , c. (C. ) (pending before the Legislature as this bill) or any other applicable law.

c. A property owner shall not enter into a rent-to-own agreement if the property is in default for nonpayment of mortgage or property tax payment obligations.

d. The rights of a tenant-buyer in a rent-to-own agreement shall not be impaired by the sale or transfer of a property by a landlord-seller to a third party, or other form of disposition of the property from the landlord-seller. A landlord-seller shall notify a third party of the rent-to-own agreement prior to the sale or transfer of a property to the third-party.

e. A landlord-seller shall not enter a rent-to-own agreement if the property is not protected by a homeowner’s insurance policy that does not conflict with any rules and regulations adopted by the Commissioner of Community Affairs to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill). If compensation is owed to the property owner pursuant to eminent domain or an insurance payment, the payment shall be divided between the landlord-seller and tenant-buyer to the extent that a payment is used for the repair or reconstruction of the property for continued use as the tenant-buyer’s residence. The percentage of the value of the property that is represented by the equitable interest shall be paid directly to the tenant-buyer.

f. A rent-to-own agreement shall not impair the implied warranty of habitability.

g. (1) A violation of P.L. , c. (C. ) (pending before the Legislature as this bill), pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), shall constitute an unlawful practice pursuant to the New Jersey consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.) and shall be subject to all applicable penalties set forth therein.

(2) A tenant-buyer who has been harmed by a violation of P.L. , c. (C. ) (pending before the Legislature as this bill) may initiate a civil action for actual damages, statutory damages of $10,000, attorneys’ fees, costs for expert witnesses, other costs incurred in proving a violation of P.L. , c. (C. ) (pending before the Legislature as this bill), and injunctive relief, which shall supplement, and shall not interfere with, affect, or in any way impede, a tenant-buyer’s remedies set forth in any other provision of law.

(3) In addition to a tenant-buyer’s action pursuant to paragraph (2) of this subsection, the Director of the Division of Consumer Affairs in the Department of Law and Public Safety shall have enforcement authority to investigate violations and impose penalties.

6. A violation of P.L. , c. (C. ) (pending before the Legislature as this bill) shall constitute an unlawful practice pursuant to the New Jersey consumer fraud act, P.L.1960, c.39 (C.56:8-1 et seq.) and shall be subject to all applicable penalties.

7. On or before the first day of the fourth month following the enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), the Commissioner of Community Affairs, in consultation with the Director of the Division of Consumer Affairs in the Department of Law and Public Safety, may adopt rules and regulations to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

8. This act shall take effect on the first day of the fourth month next following enactment, and shall apply to a rent-to-own agreement entered into or renewed on or after the effective date.

STATEMENT

This bill establishes the “New Jersey Rent-to-Own Rights Protection Act” for the purpose of protecting tenant-buyers in residential rent-to-own agreements.

The bill defines a “rent-to-own agreement” as a lease agreement for residential real property, between a landlord-buyer and tenant-seller, that includes an option or obligation to purchase the property through installments throughout the lease term or at a later date. The bill requires a rent-to-own agreement to be in writing, to be signed by the landlord-seller and tenant-buyer, and to contain a statement of all terms, including:

· the total purchase price of the property;

· the duration of the lease term before purchase;

· the amount of the option fee and whether it is refundable;

· the portion of rent payments, if any, credited toward the purchase price;

· the party responsible for property taxes, insurance, maintenance, and utility payments;

· the conditions under which the tenant-buyer may forfeit the right to purchase;

· the rights of the heirs of the tenant-buyer in the event of the tenant-buyer’s death or incapacity; and

· any other information that the Commissioner of Community Affairs (commissioner) determines necessary to effectuate the purposes of the bill, and that is in the public interest.

The bill provides a tenant-buyer with a right to obtain an independent property inspection before signing a rent-to-own agreement and, if the agreement provides an option to purchase at a later date, prior to the tenant-buyer exercising that option. The landlord-seller is also to provide the tenant-buyer with:

· a signed property condition disclosure statement, as provided for in section 1 of P.L.1999, c.76 (C.56:8-19.1);

· a full accounting of how payments will be applied toward ownership;

· a notice of any existing liens or legal claims on the property;

· proof of the receipt of a certificate of occupancy for the property, obtained no more than six months prior to entrance into the agreement; and

· any other information that the commissioner determines necessary to effectuate the purposes of the bill, and that is in the public interest.

The bill provides that a tenant-buyer is not to be required to forfeit payments made toward the purchase price unless the tenant-buyer has defaulted on the agreement after reasonable notice of at least 30 days and an opportunity to cure the default.

The bill provides a tenant-buyer with a right to record a rent-to-own agreement with the county recording office, and permits the county recording officer to charge a fee for the recording not to exceed the greater of $1 per page or the actual costs to complete the recording.

The bill prohibits a landlord-seller from engaging in certain fraudulent or deceptive conduct, which materially relates to the condition of a property, the terms of the rent-to-own agreement, or the ability, as permitted by the agreement, for the tenant-buyer to obtain financing towards the purchase of the property. The bill prohibits a rent-to-own agreement from containing any waiver of the tenant-buyer’s rights as established by the bill, or any other applicable law. Further, the bill prohibits a property owner from entering a rent-to-own agreement if the property is in default on mortgage or property tax payment obligations.

The bill prohibits the rights of a tenant-buyer in a rent-to-own agreement from being impaired by the sale of a property by a landlord-seller to a third party, or other form of disposition of the property from the landlord seller.

The bill prohibits a landlord-seller from entering a rent-to-own agreement without a homeowner’s insurance policy. If compensation is owed to the property owner as a result of eminent domain or an insurance payment, the payment is to be divided between the landlord-seller and tenant-buyer, unless used to reconstruct damage to the property for the tenant-buyer’s continued use. The percentage of the value of the property that is represented by the equitable interest, as defined in the bill, is to be paid directly to the tenant-buyer. The bill also prohibits a rent-to-own agreement from impairing the implied warranty of habitability.

A violation of the provisions of the bill is to constitute an unlawful practice under the New Jersey consumer fraud act (CFA), and subject to all applicable penalties set forth in the CFA. The bill permits a tenant-buyer who has been harmed by a violation of the bill to initiate a civil action for actual damages, statutory damages of $10,000, attorneys’ fees, costs for expert witnesses, other costs incurred in proving a violation of the bill, and injunctive relief. The bill also provides the Director of the Division of Consumer Affairs in the Department of Law and Public Safety (director) with enforcement authority to investigate violations and impose penalties.

The bill provides the Commissioner of Community Affairs with authority, in consultation with the director, to adopt rules and regulations to effectuate the provisions of the bill. The bill is to take effect on the first day of the fourth month following enactment.