On January 17, 2014, Governor Christie signed S-2018 into law as P.L. 2013, c.206. The new law took effect on January 17, 2014, but applies only to new lease agreements for real property executed on or after February 1, 2014. The new law is intended to establish parity between tenants and landlords with regard to an award of attorney’s fees or expenses.

The law establishes an implied covenant in residential leases if the lease provides that a landlord can recover attorney fees and expenses. The implied covenant requires that the landlord pay the tenant either the reasonable attorney’s fees or the reasonable expenses, or both, incurred by that tenant as the result of the tenant’s successful defense of any action or summary proceeding commenced by the landlord against the tenant, arising out of an alleged failure of the tenant to perform any covenant or agreement in the lease, or as the result of any successful action or summary proceeding commenced by the tenant against the landlord, arising out of the failure of the landlord to perform any covenant or agreement in the lease. The sponsor noted in the Statement to S-2018(1R) that a landlord is not required by law to include a provision in a written lease that permits the landlord’s recovery of attorney fees and expenses.

The law clarifies that the term “expenses” includes expenses directly related to the litigation including, but not limited to, court costs and expenses for witnesses, but does not include personal expenses for travel, reimbursement for missed work time, or child care.

Under the new law, the court must order the landlord to pay attorney’s fees or expenses, or both, that are actually and reasonably incurred by a tenant who is the successful party in such actions or proceedings to the same extent the landlord is entitled to recover attorney’s fees and expenses, or both, as provided in the lease. The law provides that the court has discretion with respect to awards of attorney’s fees or expenses, or both, for tenants to the same degree as it has with respect to awards of attorney’s fees or expenses, or both, for landlords as provided under the lease either explicitly or implicitly.

Under the law, an order based on the implied covenant must require the landlord to pay the tenant such costs either as money damages or a credit against future rent, as determined by the tenant. It also provides that any waiver of the rights and obligations under the implied covenant are void as against public policy.

The law provides that in an action or summary proceeding for non-payment of rent, a tenant who pays all rent currently due and owing on or after the filing of the complaint but prior to entry of a final judgment, and whom the court finds presented no meritorious defense to the complaint other than said payment, shall not be deemed to have successfully defended against the action or summary proceeding for the purposes of the award of attorney’s fees or expenses, or both.

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