Thinking about buying a rental property in New Jersey? Before you hand over the down payment, there’s a crucial law you need to know about: rental property owners are now required to carry liability insurance—and skipping this step could cost you big time.
What’s the Law?
In August 2022, New Jersey enacted a law (N.J.S.A. 40A:10A-1 et seq.) that mandates liability insurance for rental and business property owners. The goal? To protect tenants, visitors, and neighboring properties from financial harm due to accidents or negligence. Here’s what you need to know:
1. Minimum Coverage Requirements:
- Rental and business property owners must carry at least $500,000 in liability coverage per occurrence for property damage or injury.
- If you own a multifamily home with four or fewer units, and live in one of them, the requirement drops to $300,000 in coverage.
2. Annual Registration:
- Property owners must register their insurance certificates annually with their local municipality.
- Municipalities can charge fees for registration and impose fines from $500 to $5,000 for non-compliance.
Why This Matters to You
If you already own rental property, staying compliant isn’t just about following the rules—it’s about protecting your investment. Non-compliance could lead to hefty fines and even legal trouble, cutting into your profits and creating unnecessary headaches.
If you’re considering buying rental property or already own a rental property, knowing these laws in advance can help you avoid costly surprises.
What Should You Do Next?
Understanding New Jersey’s liability insurance law is essential, but the details can get complicated. If you’re unsure about whether your coverage meets the requirements or need help with compliance, talking to a local real estate attorney can provide clarity.
If you have questions about this article or need legal guidance on your rental property, feel free to reach out to Mark Semeraro or any of the attorneys at Semeraro & Fahrney, LLC.
