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Suppose that a tenant, T, has been renting the basement of a two unit home for several years in NJ. The initial term of the lease was for 1 year and then converted into a month to month tenancy after the first year.

The home was sold to a new owner, N (who plans on occupying the upstairs apartment) and N moved to terminate the downstairs tenancy immediately after purchasing the home by sending out a Notice to Quit that terminated the tenancy after 1 month.

Suppose that T wants to dispute both the underlying grounds for termination as well as the validity of the Notice to Quit.

T's original lease from the previous owner, O contains an arbitration agreement. Can T legally force N to arbitrate both the underlying grounds for termination and the validity of the Notice via arbitration, not in court.

Is the arbitration agreement binding on N?

Can the new owner argue that s/he isn't bound by the arbitration agreement since:

  1. s/he never signed the agreement

  2. T is in a month to month tenancy

  3. S/he moved to terminate the tenancy as soon as he purchased the home?

Will the court send the case to arbitration?

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  • Did you read the terms of the lease? I would not be surprised if you agreed to have the terms be transferrable to any subsequent owner of the property. In other words, the change of ownership has no bearing on your lease terms.
    – jwh20
    Nov 21 at 3:09
  • @jwh20 Does the lease explicitly need to state that it transfers to the new owner or does it transfer by default? In this case, the lease does not discuss what happens when the property is sold. Where in case law is it explicitly stated that a buyer is bound by all terms of a lease by default?
    – S.O.S
    Nov 21 at 3:42
  • That's why I asked. We don't know the terms of the lease.
    – jwh20
    Nov 21 at 13:19

1 Answer 1

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In general, and in particular in New Jersey, a new owner takes possession subject to existing rental agreements, and in particular subject to existing leases, unless there is a provision in the lease to the contrary. This happens automatically, by law. Thus any lease is as enforceable against the new owner as it would have been against the old.

But how enforceable is this arbitration agreement? How enforceable would it have been against the old owner O?

The basic fact about a month-to-month tenancy is that either party may end it on one month's notice, for any reason or none. Moreover, when a new owner intds to occupy the premises personally, or use them for his or her family, the requirement to honor a previous lease is, in general, not applicable.

T might be able to force N to go through arbitration, depending on the wording of the agreement, and on whether the written lease applies at all after the end of the first year (which it may well not). But on the facts as stated in the question, T would lose in arbitration as well as in court, and if there is any increased expense because of the arbitration, T would be obliged tom pay it.

Let us look at the actual NJ law

N.J.S.A. 2A:18-53 provides that:

any lessee or tenant at will or at sufferance, or for a part of a year, or for one or more years, of any houses, buildings, lands or tenements, ... may be removed from such premises by the Superior Court, Law Division, Special Civil Part in an action in the following cases:

a. Where such person holds over and continues in possession of all or any part of the demised premises after the expiration of his term, and after demand made and written notice given by the landlord or his agent, for delivery of possession thereof. The notice shall be served either personally upon the tenant or such person in possession by giving him a copy thereof or by leaving a copy of the same at his usual place of abode with a member of his family above the age of 14 years. [emphasis added]

Section 2A:18-56 provides that:

No judgment for possession in cases specified in paragraph "a." of section 2A:18-53 of this Title shall be ordered unless:
a. The tenancy, if a tenancy at will or from year to year, has been terminated by the giving of 3 months' notice to quit, which notice shall be deemed to be sufficient; or
? b. The tenancy, if a tenancy from month to month, has been terminated by the giving of 1 month's notice to quit, which notice shall be deemed to be sufficient; [emphasis added]

Section 2A:18-57 provides that:

If no sufficient cause is shown to the contrary when the action comes on for trial, the court shall issue its warrant to any officer of the court, commanding him to remove all persons from the premises, and to put the claimant into full possession thereof, and to levy and make the costs out of the goods and chattels of the person in possession.

No warrant of removal shall issue until the expiration of 3 days after entry of judgment for possession, except as provided for in chapter 42 of this Title.

Section 2A:18-61.1 provides that:

No lessee or tenant or the assigns, under-tenants or legal representatives of such lessee or tenant may be removed by the Superior Court from any house, building, mobile home or land in a mobile home park or tenement leased for residential purposes, other than (1) owner-occupied premises with not more than two rental units or a hotel, motel or other guesthouse or part thereof rented to a transient guest or seasonal tenant; ... except upon establishment of one of the following grounds as good cause ... [emphasis in original]
h. The owner seeks to retire permanently the residential building or the mobile home park from residential use or use as a mobile home park

But note that good cause is not required for an owner-occupied dwelling with no more than two rental units.

T would be wise to consult a lawyer knowledgeable about landlord/tenant law in NJ before attempting to contest the notice or eviction.

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  • Thanks for your response. and on whether the written lease applies at all after the end of the first year I think the essence of the question boils down to this point: whether the lease is binding after the "initial term". The lease states that 1) the term of the lease is for 1 year and that 2) the parties are bound to the lease for the entire initial term and any additional term as per Section R "Renewal". Section R states that the tenancy continues as a month to month tenancy after expiration of the term. Does this imply that the month to month is also subject to all terms of the lease?
    – S.O.S
    Nov 21 at 6:18
  • As a side note, the new owner plans on renting the basement to a different tenant (he plans on only occupying the upstairs)
    – S.O.S
    Nov 21 at 6:19
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    @S.O.S The general terms of the lease may well then apply to the continued tenancy. But the term "month to month tenancy" specifically indicates that either party may cancel (or raise rent) on a 1-month notice. If the house is in any part owner-occupied, the NJ statute requiring "good cause" for an eviction or non-renewal appears not to apply. For anything beyond that one should consult a lawyer. Nov 21 at 6:24
  • Thanks again for your insight. It so happens that this specific contract stipulates that the tenancy can only be terminated for "good cause". It does not differentiate between owner-occupied and non owner-occupied. So while it is true that the requirement of "good cause" does not normally extend to owner occupied premises, in this case the requirement for "good cause" is a matter of contract, not a matter of law and the contract does not specify that "good cause" is only required in non owner-occupied premises.
    – S.O.S
    Nov 21 at 6:34
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    @S.O.S It would have been helpful to mention that in the initial question, or at least to edit it in now. Comments may always be deleted. That said, that provision might be found to conflict with the "month to month" language. Even if it does not, an owner is free to raise the rent on a month to month tenancy every month, if s/he so chooses, subject to any local rent-control laws. A lawyer will probably be needed in any such case. Nov 21 at 6:43

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