Posted by Adam S. Kessler, Esq.

After the New Jersey Supreme Court’s recent decision in Green v. Morgan Properties, 215 N.J. 431 (2013), it is advisable that flat fees for attorney services included in residential leases have a direct and actual connection to time spent on a particular matter.  In the alternative, residential leases should include a provision for actual attorneys’ fees incurred and characterize such fees in the lease as “additional rent.”

The plaintiffs in the Green case were tenants in various apartment complexes owned and managed by the defendants.  Each of the tenants was the subject of a landlord-tenant (non-payment) action for eviction.  The leases of the tenants included a provision requiring payment of a $400.00 flat fee in the event an attorney was retained, a non-payment action commenced and court appearance required as a result of tenant’s failure to pay rent.

Plaintiffs alleged in their complaint that defendants filed an average of 200 eviction complaints each month in Camden County, and that because all of the actions are handled by in-house counsel, the flat fees [potentially $80,000.00 per month; i.e. $960,000.00 per year] are excessive when compared to the actual time expended by an attorney.

Although the Green Court specifically refrained from deciding whether the plaintiffs’ allegations were sufficient to state a cause of action under the Consumer Fraud Act (“CFA”) or for negligent misrepresentation, in applying New Jersey’s “indulgent standard” for motions to dismiss, the Supreme Court held that plaintiff’s complaint would not be dismissed for failure to state a cause of action.

Residential landlords should be careful in preparing their leases in light of the Green holding.  Notably, the CFA would allow a successful tenant to recover treble damages and reasonable attorneys’ fees.