Multifamily Inspections: Restore Commonsense and Balance to Multifamily Inspections in New Jersey

A-3835 (Ryan/Jasey/Cryan) and S-2795 (Van Drew/Oroho) clarifies state law to restore common-sense and balance to a comprehensive registration/regulation/inspection system that has, for nearly 45 years, served renters and the public well. It aligns and clarifies various statutes to make the State solely responsible for establishing and enforcing registration, maintenance, use, and inspection standards for rental properties of 3 or more units and prevents municipalities from imposing additional registration, licensure or inspection schemes on properties already registered with and inspected by the State.

THE OVERVIEW  

Since 1967, the New Jersey Hotel and Multiple Dwelling Law (NJHMDL) has protected renters and landlords by: (1) requiring rental properties of 3 or more units to be registered with the state which in turn provides notice of registered properties to the municipalities; (2) establishing a strict and comprehensive set of statewide use and maintenance standards for those rental units; and (3) providing for a thorough state inspection every five years holding each and every registered property to those strict standards. Rental properties containing fewer than 3 units are regulated at the local level.

Over time the regulations adopted under the original Hotel & Multiple Dwelling Act have grown from a few pages to the current version which is more than 90 pages of detailed, specific requirements establishing an exhaustive set of standards that covers both the interior and exterior of a building as well the common areas and individual apartment units. As a result, New Jersey has the MOST comprehensive and stringent state-imposed standards in the nation and DCA’s 74 point, all-encompassing inspection protocol exceeds anything conducted by any other state. The 3 million New Jersey residents who call an apartment home enjoy a level of quality, safety, and security that is second to none.

State registered properties may also be subject to several additional inspections:

  • Uniform Construction Code ("UCC") – UCC inspections ensure ongoing conformance with UCC standards and requires permits before alterations can be made and inspections once work is completed;
  • State Uniform Fire Code (“UFC”) – The UFC ensures apartments meet stringent requirements for resident and firefighter fire safety. Fire code inspections may be performed by the local government (as a Local Enforcement Agency) or by the NJ Division of Fire Safety, which enforces the code in municipalities who choose not to perform these inspections locally;
  • Certificate of Occupancy (“CO”) – State statute permits a municipality to conduct an inspection of an apartment whenever a change of tenancy occurs. On average, one-third of all rental units experience a change of tenancy each year;
  • Housing Quality Standards (“HQS”) – Apartments being rented to residents with federal rental subsidies must be inspected by the federal government before the unit can be occupied and each year thereafter;
  • Real Estate Assessment Center (“REAC”) – The Department of Housing and Urban Development (HUD) requires federally subsidized properties to undergo an additional REAC inspection to create a uniform nationwide system for assessing the physical condition of properties being assisted by the federal government. The frequency of repeat REAC inspections vary based on a scoring formula from the previous inspection.
  • Private Inspections – Mortgage lenders and property and casualty insurance carriers often require private property inspections be conducted as part of loan underwriting or insurance due diligence.

Between inspections, a renter with a problem or concern who has received an unsatisfactory response from the property owner/manager may lodge a complaint with local or state agencies which may inspect and enforce any of the aforementioned codes. Property owners who fail to maintain their properties according to Code may be subjected to significant fines and penalties. In most cases, however, property owners and managers, who are intimately familiar with the stringent requirements of the NJHMDL, are responsive to legitimate tenant concerns.

 This system protects renters:

1)    By ensuring they have safe, well maintained, and affordable rental homes.

2)    By avoiding excessive inconveniences, invasions of their privacy, and hassles that occur when they are subject to repeated inspections each of which requires them to take time away from work or other commitments to be present when the inspection occurs.

3)    From higher rents caused by redundant or multiple government processes that all meet a single, identical need.

This system helps professional property owners and managers by providing a uniform, statewide set of standards and a reasonable and predictable compliance framework. Finally, the system helps municipalities through the cost-saving and efficiency of having the State, instead of local governments, responsible for updating and maintaining the comprehensive and complex set of regulations governing multi-unit rental housing and for providing all registration and inspection activities.

THE PROBLEM

As a result of inconsistencies and confusion in State law, some municipalities have begun to duplicate the State’s role and require property owners to pay a local registration fee and submit to additional annual inspections that are entirely redundant, unnecessary, and do nothing to improve the safety or quality of rental housing. A recent report by the National Low Income housing Coalition found New Jersey to be the fourth most expensive state for renters. Local registration and inspection schemes add to the cost of rental housing in New Jersey.

A local official inspecting a property using the same standards that were already used by a State inspector is not only an example of redundant, inefficient, and wasteful government, it’s an unnecessary additional expense, invasion of privacy, and inconvenience to a renter who has to take time away from work or other commitments to be present. The cost is also borne by property owners who must dedicate staff to accompanying the inspectors.

The state registration fee is a one-time charge of $10 per building. In the event that a building changes ownership, the new owner is required to re-register the building and pay the fee.

Local governments, on the other hand, charge registration fees that range from $150-$500 per building and an additional $35-$100 per apartment. The same disparity exists when it comes to inspections. The State inspection fees are charged on a sliding scale that begins at $52 for the first unit inspected and ends at $19/unit for units 48 and above. Typical local inspection fees range from $50-100 per unit.

The fees charged by local government are supposed to be consistent with the costs associated with performing the service. The difference between the state registration and inspection fees and the local fees suggests that municipalities are charging more than is needed to conduct this essentially ministerial function.

These local registration and inspection schemes are little more than an effort to boost municipal revenue in the face of declining need for the services that local construction code enforcement offices provide as a result of the economic downturn.

THE SOLUTION

Just as the State establishes and enforces uniform construction standards, statewide standards for the safe maintenance and operation of an automobile and a global set of rules that ensure that hospitals all follow the same rules and procedures to ensure safety, so too should they regulate rental apartments.

New Jersey does not allow municipalities to impose additional conditions on cars, require owners to also register their vehicles locally and submit to an additional local inspection because a statewide standard that is thorough is both more efficient and more practical. When thorough, comprehensive, and uniform standards make sense, as they do in the regulation of apartment dwellings, it is more efficient, effective and fair to have the State create and enforce those standards.

Apartments may take slightly different forms and exist in different geographic locations, but they are essentially the same when it comes to those items required to maintain safety, security and quality. This is a matter of efficiency. The State standards are comprehensive (90 pages) and strict and they should be established and maintained as the singular standard for all multi-family dwellings containing 3 or more apartments.

S-2795/A-3835 clarifies state law to restore common-sense and balance to a comprehensive registration/regulation/inspection system that has, for nearly 45 years, served renters and the public well. It aligns and clarifies various statutes to make the State is solely responsible for establishing and enforcing registration, maintenance, use, and inspection standards for rental properties of 3 or more units and prevents municipalities from imposing additional registration, licensure or inspection schemes on properties already registered with and inspected by the State.

S-2795/A-3835 protects the safety and security of renters by restoring the integrity of the uniform statewide regulation, registration and inspection system that has protected renters for nearly 45 years. It further protects renters by eliminating redundant government programs the cost of which drive up rents without offering any additional benefits to the renter.

S-2795/A-3835 protects property owners by eliminating conflicting, duplicative, and overlapping laws to create consistency and predictability across all 566 municipalities in New Jersey.

S-2795/A-3835 preserves the rights of municipalities to conduct inspections related to the issuance of a certificate of occupancy (CO), respond to nuisance complaints like excessive noise, overcrowding, or unsanitary living conditions, conduct regular inspections for compliance with the Fire Code, and oversee (i.e. register and inspect) one and two unit rental properties.

By eliminating duplication between municipal and state apartment registration and inspection, the State will assist municipalities to streamline and reduce their operations and provide a tool to lower municipal costs.

Additionally, this bill encourages investment and job creation by giving those who own or develop new rental housing properties the confidence to know that they will not be subject to the additional costs and burdens associated with unreasonable, redundant, and unnecessary bureaucracy and red tape.

Update

On May 12, S-2795 was amended and released by the Senate Community & Urban Affairs Committee in a unanimous, 5-0 vote. Amendments were made to address concerns raised by the NJ Tenants Organization and clarify that a municipality may continue to adopt and enforce ordinances concerning public health and safety.

On June 27, the bill was amended on the Senate Floor in a bi-partisan, 26-0 vote. Amendments incorporated recommendations from the NJ Department of Community Affairs, clarifying that municipalities continue to have authority to abate nuisances and may conduct inspections in response to a complaint. Additionally, amendments were made at the request of the fire service to clarify that municipalities may continue to adopt ordinances concerning fire safety, under the Uniform Fire Safety Act, and may continue to conduct inspections to enforce the Fire Code regulations. [S-2795 already contained a specific provision clarifying that municipalities may continue to perform ‘certificate of occupancy’ (CO) inspections at unit turn-over.]

 

Pending Legislation: