New Jersey Rent Control Exemption: Failure to File No Longer Fatal?

Failing to file a rent control exemption notice with the municipal construction official did not, on its own, cost a New Jersey apartment building its exemption from local rent control. That is the central holding of a September 28, 2026 opinion from U.S. District Judge Madeline Cox Arleo in the closely watched Portside Towers litigation in Jersey City, and the Portside Towers ruling changes how owners and developers should think about their exposure if they miss a notice.

IMPORTANT CAVEAT: The ruling came from the District Court of New Jersey and Judge Arleo’s written opinion is not binding authority. A District Court ruling, whether published in the Federal Register or not, is only persuasive authority and can never be binding authority in a subsequent case, even a case heard by the same court that rendered the earlier ruling.

The decision is available here.

Key takeaways:

• The court held that the notice filing required by N.J.S.A. 2A:42-84.4 is mandatory, but it is not a condition precedent to the rent control exemption. The exemption attaches by operation of law once the criteria in N.J.S.A. 2A:42-84.2 are met.
• The court reversed the Jersey City Rent Leveling Board’s decision that Portside Towers had always been subject to rent control, and found both towers exempt.
• For property owners without proof that they filed a timely rent control exemption notice, this decision is a positive update, but it affects only this property. This decision is not binding on any court in any other case.

This post follows up on our November 2025 Firm Insight, Failing to Comply With NJ Rent Control Exemption May Prove Costly.

What Happened in the Portside Towers Rent Control Exemption Case?

New Jersey’s Newly Constructed Multiple Dwellings Law, N.J.S.A. 2A:42-84.1 et seq., exempts new apartment buildings with four or more rental units from municipal rent control for up to 30 years. The law imposes two notice duties on owners: a written statement claiming the exemption, filed with the municipal construction official at least 30 days before the certificate of occupancy is issued (Section 84.4), and written notice of the exemption to prospective tenants (Section 84.3).

Portside Towers consists of two connected high-rise apartment buildings on the Jersey City waterfront. The project was originally planned as condominiums under a 1989 construction permit. After the original developer’s foreclosure, a new owner bought the property at a 1994 sheriff’s sale, converted it to rental housing, and sent the construction code official a letter claiming the exemption for Tower 1. The official responded that his office had “no jurisdiction over rent controls.” No comparable letter was located for Tower 2. For nearly three decades, both towers operated as exempt from rent control, and leases included addenda telling tenants so.

In 2022, tenants filed illegal rent petitions. The city’s Bureau of Rent Leveling found both towers exempt. On November 3, 2023, the Rent Leveling Board reversed. It held that the Section 84.4 filing is a “mandatory condition precedent” requiring strict compliance, that the Tower 1 letter came too late because it followed the original 1992 certificate of occupancy, and that Tower 2 had no qualifying notice at all. The Board directed the Bureau to recalculate rents using a six-year lookback reaching back to 2016.

The owners, The Towers at Portside Urban Renewal Company, LLC and Equity Residential Management LLC, challenged the Board’s decision in the U.S. District Court for the District of New Jersey. Tenant associations and individual tenants intervened and asserted their own claims. Judge Arleo’s Portside Towers ruling does not end the lawsuit, but does resolve this particular issue at the heart of the Portside Tenants’ claim.

What Does the Portside Towers Ruling Mean for Property Owners and Developers?

How Much Weight Does the Portside Towers Ruling Carry?

The Portside Towers ruling is persuasive authority, not binding precedent. A federal district court opinion does not bind other federal judges, the Third Circuit, or any New Jersey state court. On a question of state law like this one, the federal court’s role is to predict how the New Jersey Supreme Court would rule, and the state courts remain free to reach a different conclusion. Municipal rent leveling boards are likewise not formally bound, although owners can now cite a thorough, reasoned opinion in their favor.

At the same time, Willow Ridge is also non-binding. That leaves no binding appellate decision in New Jersey squarely resolving whether a missed Section 84.4 filing defeats the exemption. Until the Appellate Division, the New Jersey Supreme Court, or the Third Circuit addresses the question, owners should expect municipalities and tenants to keep pressing the issue.

Should Owners Still File the Rent Control Exemption Notice?

Yes. Filing the rent control exemption notice remains mandatory, and a missed filing can still lead to penalties, disputes over the certificate of occupancy, and costly litigation like the Portside case, which has been pending for nearly three years. The ruling also addressed only the construction official filing under Section 84.4; owners should still provide tenants with the written exemption notice required by Section 84.3. Timely compliance with both remains the simplest way to avoid a dispute.

What If a Rent Control Exemption Notice Was Never Filed?

Owners who did not file the rent control exemption notice, or who cannot confirm a predecessor did, are in a stronger position than they were a week ago, but they should not assume the problem is solved. They should assess their records, prepare for the possibility that a tenant complaint leads to a hearing before the Rent Leveling Board, and determine whether the building otherwise meets the Section 84.2 criteria. The same diligence applies to buyers evaluating an existing building that has operated under the exemption.

Every developer or property owner of a multiple dwelling (4 or more units) should have a copy of the proof of filing of the rent control exemption letter. If you do not have proof of filing and a copy of that letter, contact Patrick T. Conlon right away to review your records and your options.

How One Federal Court Analyzed New Jersey’s Rent Control Exemption Law

The Portside Towers ruling does not change New Jersey’s rent control exemption law. It is a decision by one federal district court, binding only in that case and persuasive at most in later disputes. That said, because it is the only significant federal court decision addressing this particular issue, the opinion is instructive. It shows how one court, applying New Jersey law, analyzed whether a missed Section 84.4 notice filing automatically defeats an otherwise available exemption. Judge Arleo concluded that it does not, relying on the statute’s text and history:

• The court said Section 84.2 identifies the exemption criteria. Judge Arleo read Section 84.2 as setting out the requirements for the exemption: the building must be a “multiple dwelling,” must have been constructed (which the statute defines to include “converted”) under a construction permit issued after June 25, 1987, and must have received a certificate of occupancy. In the court’s view, Section 84.2 is significant because it does not list the Section 84.4 notice filing as one of those criteria.
• Section 84.4 uses mandatory language, but the court did not read it as creating forfeiture. The court acknowledged that the filing requirement is mandatory. However, it reasoned that the statute does not expressly state that a missed filing defeats, delays, or authorizes a municipality to revoke the exemption.
• The 1999 amendment informed the court’s interpretation. Judge Arleo emphasized that, when the Legislature extended the exemption retroactively to certain REIT-financed buildings, it did so only “provided that” the owner complied with Section 84.4. To the court, that wording indicated that the Legislature knew how to make Section 84.4 a condition precedent when it intended that result.
• The court disagreed with Jersey City’s ordinance theory. Judge Arleo read Sections 84.5 and 84.6 as prohibiting local action that limits or impairs an exemption available under state law. Based on that reading, she concluded that Jersey City’s ordinance, insofar as it treated the Section 84.4 filing as a prerequisite to the exemption, conflicted with state law and was preempted.

The court also declined to follow the Appellate Division’s unpublished decision in Willow Ridge Apartments, LLC v. Union City Rent Stabilization Board (2022), which our prior post cited as holding that an owner who cannot prove a proper filing may not claim the exemption. Judge Arleo noted that Willow Ridge is unpublished and non-binding, and she found it unpersuasive because, in her view, it did not analyze the text of Sections 84.2 and 84.4 or the 1999 amendment.

The court did not, however, treat Section 84.4 as meaningless. Judge Arleo observed that municipalities may still impose monetary penalties for non-compliance under N.J.S.A. 40:49-5 and may condition issuance of a certificate of occupancy on receipt of a timely notice. What the court said municipalities may not do, on the facts before it, is use a missed Section 84.4 filing to strip an exemption that otherwise attached.

The opinion also included two additional conclusions that owners may cite in future disputes, again as persuasive authority rather than binding law. In Judge Arleo’s view, a condominium project converted to rental housing can qualify as “constructed” under the statute, and a certificate of continued occupancy issued after such a conversion can start the 30-year exemption period.

What Should Owners and Developers Do Now?

The Portside Towers ruling gives owners and developers a strong argument that a missed Section 84.4 filing does not forfeit a New Jersey rent control exemption. Still, the law remains unsettled, and the case is far from over. Developers planning new rental projects, owners of buildings that have operated as exempt, and buyers evaluating those properties should contact Patrick T. Conlon or a member of Scarinci Hollenbeck’s Commercial Real Estate and Land Use group to review their compliance and exposure.