Cases involving property law rarely reach state supreme courts. However, two cases are pending before both the Supreme Courts of New Jersey and Pennsylvania – and every landlord in both states should know about them.
In September 2023, the Supreme Court of New Jersey granted an appeal in Pace v. Hamilton Cove,[1] which involves residential tenants of a luxury condominium, Hamilton Cove Apartments in Weehawken, New Jersey, who brought a putative class action against their landlord for common law fraud and violations of the Consumer Protection Fraud Act. The apartment complex consists of three buildings containing hundreds of apartments. Upon moving into the apartments, Plaintiffs learned of the apartment complex’s security shortfalls, including that the security cameras did not function, and representative Plaintiffs-Tenants William Pace and Robert Walters sued the landlord. Defendant-landlord filed a motion to dismiss for failure to state a claim upon which relief can be granted or, alternatively, to strike tenants’ class action allegations, arguing that the Plaintiffs’ lease agreements waived their right to file a class action. The trial court denied the landlord’s motion, and the landlord appealed.
A three-judge state intermediate appellate panel established a bright-line rule that the waiver of the right to maintain a class action is unenforceable absent a mandatory arbitration agreement.
The court explained that New Jersey had a “longstanding, fundamental public policy favoring class actions” and, ergo, refused to enforce a class action waiver in a contract that did not also contain a mandatory arbitration provision. In other words, a landlord cannot avoid a class action filed by its tenants unless the tenants’ lease agreement also requires mandatory arbitration. Hence, in order to protect themselves against class action suits by tenants, New Jersey landlords should make sure that their lease agreements feature a class action waiver WITH an arbitration agreement.
Here, finding “no societal interest in enforcing [the] class action waiver” in the Hamilton Cove leases, the Appellate Division held that said waivers were unenforceable, and, accordingly, affirmed the trial court, prompting the landlord to petition the state Supreme Court to hear its appeal, which the Court granted. The appeal is limited to the sole issue of: “Are class action waivers unenforceable in contracts that do not contain a mandatory arbitration provision?”
Meanwhile, also in September, the Pennsylvania Supreme Court granted appeal in Landlord Service Bureau, Inc. v. The City of Pittsburgh.[2] Back in 2015, the Council of the City of Pittsburgh enacted an ordinance known as the Residential Housing Rental Permit Program (“Rental Ordinance”) to ensure rental units met all applicable building, existing structures, fire, health, safety, and zoning codes and to provide an efficient system for compelling both absentee and local landlords to correct violations and to maintain rental properties in proper condition within the City. Under the Rental Ordinance, no rental unit could be leased, rented, or occupied without the owner first obtaining a permit from the City and designating a responsible local agent. Additionally, the Rental Ordinance required the City’s Department of Permits, Licenses, and Inspections to promulgate regulations and to create a manual of good landlord practices, a performance-based regulatory system, a landlord academy, incentives to encourage good landlords and other best practices in the field of rental licensing.
Following enactment of the Rental Ordinance, Landlord Service Bureau, Inc., Michelle Williams, Collyer Realty Company d/b/a Galasso Real Estate Services, Santo Policichio, and Crown Real Estate and Management Service filed suit against the City seeking (1) a declaration that the Rental Ordinance was void and unconstitutional and (2) a permanent injunction against its enforcement. The trial court granted partial judgment on the pleadings in favor of the City and City Council, and Plaintiffs appealed.
On appeal, Plaintiffs-Appellants contended that the trial court erred, because the ordinance imposes affirmative duties, responsibilities, and requirements upon the conduct of their business, which regulation is expressly prohibited under the Home Rule Charter and Optional Plans Law (“Home Rule Law”). The Commonwealth Court, which here served as the intermediate appeal court, held that requiring the registration of rental units was not the problem with the Rental Ordinance – it was the inspection without permission of an owner and lessee, together with the obligation of rental unit owners to hire a responsible local agent, to follow best practices, to attend a landlord academy, and to have their registration and inspection information put on a public, online database that was the problem. The City has not identified “a statute applicable in every part of this Commonwealth” that “expressly” authorized this wide-ranging regulation of the residential landlord business, as required by the Home Rule Law.[3] Consequently, the Commonwealth Court concluded that the City was without authority to enact the Rental Ordinance, as written, and reversed the trial court’s order.
The City then petitioned the Pennsylvania Supreme Court to accept the case for appeal, which it did on the sole issue of whether the City had authority under the Home Rule Law to enact the Rental Ordinance. Although this action only involved a Pittsburgh ordinance, the Pennsylvania Supreme Court’s decision will have wider implications for any home-rule municipality’s ability to regulate landlords within its borders.
The attorneys at Obermayer will continue to keep landlords abreast of these cases and any other changes to the law affecting lessors.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
[1] 295 A.3d 1251 (N.J. Super. App. Div. 2023), appeal granted by Order, M-20 September Term 2023, 088302 (N.J. Sept. 6, 2023).
[2] 291 A.3d 961 (Pa. Cmwlth. 2023), appeal granted, No. 82 WAL 2023, 2023 WL 5662135 (Pa. Sept. 1, 2023).
[3] 53 Pa. C.S. § 2962(f).
Brooke is an attorney in Obermayer’s Business and Finance department. Her practice focuses on real estate transactions, zoning, and land use. Brooke represents private clients, as well as real estate developers and...
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