227 A.3d 291
N.J. Super. Ct. App. Div.2020Background
- Plaintiff landlord entered a Project-Based Section 8 HAP contract (covering all 480 units) subject to HUD regulation; HUD-authorized contract rents were increased for two-bedroom units to about $2,700–$2,724.
- Defendants lived in a two-bedroom unit since 1980; they stopped receiving Section 8 subsidy in 2002 and paid full contract rent thereafter.
- After a 2017 consent judgment temporarily set rent at $1,460 and required recertification, defendants recertified and signed a one-year HUD model lease. HUD later approved a contract-rent increase and plaintiff served notice raising rent to $2,724 effective July 1, 2018.
- Defendants refused to pay the HUD-approved increase; landlord filed a summary dispossess (eviction) action under N.J.S.A. 2A:18-61.1(a) and (f).
- Before trial, plaintiff moved to bar defendants from challenging the HUD-approved increase; the trial judge granted the motion, finding HUD regulations preempted New Jersey’s Anti-Eviction Act defense. The parties later settled, but the Appellate Division affirmed the preemption ruling as an important recurring issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HUD regulations preempt N.J.S.A. 2A:18-61.1(f) (unconscionability defense to eviction) | HUD regs (24 C.F.R. subpart) preempt state rent regulation, so tenants may not litigate HUD-approved rent increases in eviction proceedings | N.J.S.A. 2A:18-61.1(f) is not a rent-regulation statute and therefore not preempted; tenants can assert unconscionability | Court held the HUD regulations preempt the Anti-Eviction Act defense and affirmed excluding evidence challenging a HUD-approved increase |
| Whether HUD regulatory control extends to tenants who no longer receive Section 8 assistance | HAP contract covers all contract units; HUD regulatory scheme governs the property and benefits tenants even if not currently subsidized | Because defendants no longer received subsidy, HUD subpart should not apply to their tenancy | Court held the HAP contract and HUD regulations govern the units despite these tenants’ lack of subsidy; HUD control still applies |
| Whether HUD’s failure to provide local-board notice under 24 C.F.R. § 246.22 defeats preemption | Preemption does not depend on HUD’s notice to a local rent board; even if notice absent, the board has no veto and notice is not a precondition to preemption | HUD’s own regulation requires written notice to the local rent board as a prerequisite to preemption; record lacks proof of compliance | Court found no authority making §246.22 notice a prerequisite to preemption and rejected the argument that lack of notice defeats preemption |
Key Cases Cited
- Franklin Tower One, L.L.C. v. N.M., 157 N.J. 602 (discusses federal preemption theories and burden of proof)
- Glukowsky v. Equity One, Inc., 180 N.J. 49 (federal agency regulations receive deference and can preempt state law)
- Hill Manor Apartments v. Brome, 164 N.J. Super. 295 (Cty. Ct. 1978) (held HUD regs preempt state unconscionability defense)
- Cal. Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272 (pre-emption not lightly presumed)
- Wis. Pub. Intervenor v. Mortier, 501 U.S. 597 (state police powers not superseded absent clear congressional intent)
- Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (federal supremacy and preemption principles)
- Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (deference to reasonable agency interpretation)
- Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (states have broad power to regulate landlord-tenant relations)