Buy rental property in New Jersey with the rules in view

Registration: who you file with depends on the building

New Jersey's landlord identity law requires the owner of a one- or two-unit rental that is not owner-occupied to file a registration statement with the clerk of the municipality where the building is located. An owner-occupied two-family home does not need to be registered. The statement must also be given in writing to each tenant and posted in the building.

A building with three or more units is a multiple dwelling under the New Jersey Hotel and Multiple Dwelling Law. Its owner registers with the Bureau of Housing Inspection in the Department of Community Affairs (DCA) instead. When a multiple dwelling changes hands, the new owner must register with the Bureau; DCA's instructions say within 20 days of taking ownership. Multiple dwellings are also inspected by the Bureau on a cycle that depends on the building's violation history.

Here's what that means for you: an unregistered landlord can have an eviction case held open, and eventually dismissed, until the registration is fixed. Registration belongs on your closing checklist, not your someday list.

Lead-safe certification for older rentals

Under P.L. 2021, c.182, certain single-family, two-family and multiple rental dwellings built before 1978 must be inspected for lead-based paint hazards. DCA says each covered unit must be inspected every three years, or upon tenant turnover, whichever is earlier. A lead-safe certificate is valid for two years from the date it is issued.

Some dwellings are exempt, including those built during or after 1978, those certified lead-free, certain seasonal rentals, and certain multiple dwellings with a long, clean registration history with DCA. Municipalities perform the inspection or hire a certified lead evaluation contractor, and they must let owners hire a certified contractor directly. If hazards are found, the owner must remediate them.

When you look at a pre-1978 rental, ask for the current lead-safe or lead-free certificate and build the inspection into your turnover plan.

Certificates of occupancy on tenant turnover

Many South Jersey towns require a rental inspection and a certificate before each new tenant moves in. In Cherry Hill, for example, a Rental Housing Certificate of Occupancy inspection is required for every rental unit whenever occupancy changes, and tenants may not move in until the certificate is issued. Each town sets its own process, so check the rental rules with the municipality where the property sits.

Tenant protections and fair housing

New Jersey's Anti-Eviction Act (N.J.S.A. 2A:18-61.1 et seq.) applies to most residential rentals, including single-family homes and apartment buildings. A landlord must have good cause to evict or to refuse to renew a lease, and must prove those grounds in court. The law may not apply to an owner-occupied building with two or fewer rental units. Landlords must also give tenants DCA's Truth in Renting statement, and every landlord must provide a Flood Risk Notice to prospective renters. The security deposit cannot be more than one and one-half times one month's rent (N.J.S.A. 46:8-21.2).

The federal Fair Housing Act and New Jersey's Law Against Discrimination both apply to rentals, and New Jersey's law protects more characteristics than federal law, including a tenant's source of lawful income or rent payment, such as Housing Choice Voucher assistance. HUD and the New Jersey Division on Civil Rights publish the full lists. Your screening criteria and your advertising both need to follow these rules.

1031 exchanges: plan before you sell

Section 1031 of the Internal Revenue Code lets an investor exchange real property held for business or investment for like-kind real property without recognizing gain at that time. Cash or other non-like-kind property received in the exchange can be taxable. A property used solely as your personal residence does not qualify.

The deadlines are set in the rules. The IRS says replacement property must be identified within 45 days after you transfer the property you are giving up, and received within 180 days or by the due date of your tax return, whichever is earlier. The exchange is reported on Form 8824. A qualified intermediary is commonly used, and the IRS notes that your agents and related parties are not eligible to serve as one. Talk with your CPA and attorney before you list the property you plan to exchange.

How Cathy works with investors

Cathy Walters has been a licensed New Jersey real estate professional since 2007 and has called South Jersey home since 1984. She offers acquisition guidance and portfolio development for both new and experienced investors.

She works with a network that includes real estate attorneys, contractors, CPAs, inspectors, appraisers, insurance professionals and mortgage professionals, so the questions about a property get to the right person early. Her eye for design helps you see what a property could become, and what that work may involve. As a Certified Real Estate Negotiator, she will walk you through each term before you agree to it. Let's look at the bigger picture together.

Before you buy a New Jersey rental: what to check

• Confirm how many units the building has and who it must be registered with: the municipal clerk or DCA's Bureau of Housing Inspection.
• Ask for the current lead-safe or lead-free certificate on any pre-1978 unit.
• Call the town about its rental certificate of occupancy and inspection process for tenant turnover.
• Review existing leases, security deposits and the Truth in Renting and Flood Risk Notice records.
• Remember that existing tenants keep their Anti-Eviction Act protections after the sale.
• Talk with your CPA about 1031 timing before you list a property you plan to exchange.
• Ask your attorney to review registration, inspection and lease documents during attorney review.