Commercial evictions in New Jersey are poised to increase under new orders issued by the New Jersey Supreme Court. While most eviction proceedings were placed on “pause” in light of COVID-19, commercial landlords and lenders may now proceed with certain landlord/tenant actions and post-judgment actions in commercial foreclosures.

Impact of COVID-19 on Commercial Real Estate Matters

In response to the ongoing COVID-19 public health emergency, the Supreme Court of New Jersey has authorized the temporary suspension of landlord/tenant trials, subject to a few narrow exceptions, since March 16, 2020.  In July 2020, the New Jersey Supreme Court issued an order that allowed commercial or residential landlords to make an application for an eviction trial in certain emergency situations, including if a tenant was destroying the property or engaged in illegal activity. While commercial foreclosure trials have continued during the pandemic, the courts have withheld post-judgment action, including the issuance of writs of possession.

While these restrictions have provided welcome relief for commercial tenants, they have made it difficult for landlords to regain possession of commercial properties, even when tenant businesses are no longer operational. Lenders have also been left in limbo with regard to whether they may proceed with foreclosures.

Commercial Foreclosure Notice

In a Notice to the Bar, dated February 5, 2021, the New Jersey judiciary announced that, effective February 15, 2021, courts will resume post-trial activity, including issuance of writs of possession, for commercial foreclosure matters.

The announcement is likely unwelcome news for commercial property owners that are behind on mortgage payments. At the same time, it is a necessary step towards returning the legal system to its pre-pandemic operating status. By allowing actions to proceed through the legal process, it will also bring clarity for borrowers and lenders.

Commercial Landlord/Tenant Trials

In a second Notice to the Bar, dated February 5, 2021, the New Jersey Supreme Court clarified and expanded the circumstances in which a landlord may apply by Order to Show Cause for a trial in a commercial landlord/tenant matter.

Under the Order, a commercial landlord filing an Order to Show Cause must still allege emergent circumstances, and the basis of the landlord/tenant action generally can’t be nonpayment of rent. However, emergent circumstances can now exist where the tenant has vacated the property; the tenant's business is not operating and will not resume operations; or the commercial landlord is facing foreclosure or a tax lien.

In such cases, the court will evaluate the application and determine whether emergent circumstances exist, and a hearing will be held. If the court finds that emergent circumstances exist, the commercial tenant will be notified, and a trial will be scheduled. After that trial, if the commercial landlord prevails, judgment will be entered, and a warrant of removal can be issued.

Key Takeaway

The Orders will not lead to a rash of commercial evictions overnight. However, the easing of restrictions does mean that parties to landlord/tenant and commercial foreclosure actions may need to shift their legal strategies.

As the COVID-19 pandemic continues to evolve and we slowly approach the “new normal,” additional orders are likely. We encourage lenders/borrowers and tenants/ landlords to stay up-to-date on legal developments at both the state and local level and contact experienced counsel to determine how you may be impacted.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Chris Dzwilewski, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.