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rivergirl104

Registered: 04/26/10
Posts: 3
Reply with quote  #1 

I'm a realtor in NJ.  I have a client who is selling his house, and with the proceeds of the sale, wants to pay a year's rent in advance, to compensate for the fact that his credit has suffered in the past couple of years.  There's a lot of that going around these days.  Is there any law in NJ prohibiting a landlord from receiving rent in advance?  It could be held in an escrow account and withdrawn monthly.

OHlandlord

Registered: 01/20/07
Posts: 3,537
Reply with quote  #2 
Hmm, will have to research that one.  Most states don't have laws that say a LL can't accept more than a month of rent.  There are exceptions though:  PA, for one, counts prepaid rent as a deposit.  Some other states do too.  (It guards against a monetary damage - unpaid rent- at the end of the tenancy.)  So if a LL there accepts the deposit plus the last month's rent, regulations in PA imply that he must return any deposit over one month's rent after a year of leasing.  He has to return that last month of rent to the tenant after the first year.  (PA law says they can accept up to 2 months of rent as deposit for the first year.)  Some states define the deposit as any money that guards against a damage; some others define it as any money taken that is not current rent.  In these states, pre-paid rent would be considered a deposit.

Now, NJ statutes say you can only accept 1 1/2 months of rent as deposit.  So if NJ considers prepaid rent as deposit, you would be unable to accept this.  You'd have to see if NJ considers pre-paid rent as security.  Look for a definition of security in NJ and perhaps check case law on what is considered security.

You may also find that some LLs won't accept rent that far in advance.  In many states, it is difficult to evict over anything but unpaid rent.  Lease violations may be ignored by a court if rent is accepted.  Pre-paid rent has already been accepted, making it very difficult for a LL to evict.  Some LLs may refuse this much rent for fear that they would be stuck with a PITA tenant they could not evict.  In NJ, the lease must state the exact causes of violations that are subject to eviction.  That means if the lease is not specific, you may not find a LL who wants to chance being stuck with the tenant and the violations for the whole year.  Perhaps the tenant should offer the larger (1 1/2 months) security deposit and the tenant just put this money in a separate account, show the LL proof of the money in that account, and send a check to the LL each month?

rkkeller

Registered: 04/07/08
Posts: 756
Reply with quote  #3 
How about accepting 12 checks, one for each months rent. Then you can cash one every month.

This might be better than 1 check for all 12 months rent in case a problem and you need to get rid of them.
rivergirl104

Registered: 04/26/10
Posts: 3
Reply with quote  #4 

Thanks for the input...I did think about getting 12 checks and post-dating them, but that would miss the point of the tenant's having the ability to pay, because at any given time after the signing of the  lease, there may not be enough money in the account to cover the checks.  The motivation for the landlord to disregard the so-so credit would be knowledge that there would be no worries about rent for the entire year.  The check for the year's rent would be certified. 

OHlandlord

Registered: 01/20/07
Posts: 3,537
Reply with quote  #5 
12 postdated checks are the same as one check when a LL is considering if he can evict or not.  He would have already accepted that rent, whether he cashed the checks or not.

Perhaps the applicant could get a co-signer?  That would make the LL feel better about accepting the credit impaired applicant without worrying about the deposit law.  Maybe he could deposit that year's rent into a relative's account who would vouch for him as a co-signer.

rivergirl104

Registered: 04/26/10
Posts: 3
Reply with quote  #6 

According to a handbook that we distribute in NJ, a landlord cannot require anything more at the signing of the lease than the equivalent of 1 month's rent, and a month and a half security deposit, no matter what you call it.  The crux of my question was can a landlord accept more if it is offered by the tenant.  Yesterday the attorney that my office uses told me that the LL cannot require or accept anything more than the 2 and 1/2 months worth.  Also yesterday another realtor who does tons of rentals told me that military folks who may be out of the country on short notice for extended periods of time, will often pay several months in advance.   Maybe they can pay in advance later on, after the initial signing of the lease. So go figure, still a little confusing, but I'm always gonna go with the attorney.

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