Wade Clark Mulcahy LLP

<p style="text-align: justify;">The case of <a href="https://www.njcourts.gov/attorneys/assets/opinions/appellate/unpublished/a5056-18.pdf?c=193"><em>Rienzi v. Giacoman</em></a> arose out of a trip and fall in front of Mr. Giacoman’s three-family building. Giacoman lived on the first floor of the building with his brothers and leased the other two apartments to tenants. He paid a monthly mortgage in addition to utilities and testified that the rent he collected barely covered his monthly expenses. The trial court granted Giacoman’s motion for summary judgment at the close of discovery.</p>
<p style="text-align: justify;">In New Jersey, owners of residential properties owe no duty to maintain abutting sidewalks, but commercial property owners do. The issue in this case was whether the property was residential or commercial. New Jersey courts have essentially held that if the owner profits from the property by collecting rent that exceeds carrying costs, the property will be deemed commercial.</p>
<p style="text-align: justify;">Specifically, there is a four part test employed by courts to determine whether the property is residential or commercial: (1) the nature of the ownership, including whether the property is owned for investment or business purposes; (2) the predominant use of the property, including the amount of space occupied by the owner on a steady or temporary basis, to determine whether the property is utilized in whole or in substantial part as a place of residence; (3) whether the property has the capacity to generate income, including a comparison between the carrying costs with the amount of rent charged to determine if the owner is realizing a profit; and (4) any other relevant factor when applying “commonly accepted definitions of ‘commercial’ and ‘residential’ property.”
Applying this law to the facts in <em>Rienzi</em>¸ the appellate division was satisfied that the property was not “commercial” because Giacoman lived there and barely profited off the rent collected. Moreover, no commercial enterprises operated any business out of the property.</p>
<p style="text-align: justify;">Use of properties by their owners varies widely, and there are a lot of close calls when it comes to determining whether a property is “commercial” or “residential.” Here, the property was deemed “residential” even though the owner profited slightly from collecting rent – something to keep in mind for potential defenses.</p>
<p style="text-align: justify;">Thanks to Mike Noblett for his contribution to this post. If you have any questions or comments, please contact <a href="mailto:chayes@wcmlaw.com">Colleen Hayes</a>.</p>