Vital Legal Update for New Jersey Landlords and Lenders

Vital Legal Update for New Jersey Landlords and Lenders

The New Jersey Supreme Court has authorized the resumption of commercial landlord-tenant trials as of June 2, 2021...

The New Jersey Supreme Court has authorized the resumption of commercial landlord-tenant trials as of June 2, 2021. However, it will likely be some time before the residential eviction moratorium is lifted.

COVID-19’s Impact on Evictions and Foreclosures

In response to the ongoing COVID-19 public health emergency, the Supreme Court of New Jersey authorized the temporary suspension of residential and commercial landlord-tenant trials on 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. In February 2021, the New Jersey Supreme Court issued another Order, clarifying and expanding the circumstances in which a landlord may apply by Order to Show Cause for a trial in a commercial landlord-tenant matter.

Separately, Governor Phil Murphy’s Executive Order 106 suspended residential evictions, with the moratorium slated to last until two months after the conclusion of the COVID-19 public health emergency or state of emergency. The residential eviction moratorium is subject to narrow exceptions “in the interest of justice.”

Commercial Landlord-Tenant Trials Resume

With COVID-19 statistics improving, the state is gradually rescinding many of the restrictions that were put in place to address the pandemic. In an Order, dated June 2, 2021, the New Jersey Supreme Court announced that the suspension of commercial-landlord tenant trials is now over. Accordingly, pending and newly filed commercial landlord-tenant cases will be scheduled for trial.

Going forward, settlement conferences and trials generally will be conducted in a virtual format, although the trial court may determine to proceed in person in a particular matter based on the individual facts of the case. The Order further provides that all commercial landlord-tenant actions will proceed without additional requirements or modified procedures, except as to the presumption that proceedings will be conducted via·a remote format.

The Order is good news for commercial landlords and lenders, which may now proceed with landlord-tenant actions and post-judgment actions in commercial foreclosures. However, it is important to recognize that it may still take some time for the courts to address the significant backlog that has accumulated during the pandemic. Currently, 54,606 landlord-tenant cases are pending in New Jersey, according to the Administrative Office of the Courts.

Future of Residential Eviction Moratorium

The New Jersey Supreme Court’s latest Order does not impact residential landlord-tenant matters. To avoid a deluge of evictions and foreclosures, the moratorium is still in place.

On June 4, Gov. Murphy signed Assembly Bill 5820, which ended the public health emergency declared by the Governor to address the COVID-19 pandemic, with the exception of certain executive orders, directives, and powers that will remain in effect temporarily. Executive Order 106, which imposed the residential eviction moratorium, is one of the Governor’s orders that was not extinguished. It will remain in effect until January 1, 2022, unless revoked or modified before then.

The New Jersey Legislature is also considering bills that provide relief for residential tenants and property owners. Assembly Bill 5684, which was recently advanced by the Assembly Housing Committee, would provide protections to certain homeowners and small landlords during the COVID-19 pandemic emergency period and 60 days thereafter. Under the bill, the definition of “impacted homeowner” includes a person who owns and occupies a residential building in which dwelling units are rented or offered for rent, which building contains no more than four dwelling units.

Assembly Bill 5684 specifically provides that, during the emergency period, a creditor is required to grant a mortgage forbearance to an impacted homeowner if the impacted homeowner submits a written request to the mortgage servicer affirming the following: the impacted homeowner has suffered a substantial reduction of income resulting from COVID-19 or the resulting Public Health Emergency or State of Emergency, including a financial hardship from a reduction in hours or loss of employment, or increased costs incurred in necessary child care resulting from the closure of schools or caring for family members who are ill due to COVID-19 or quarantined due to a suspected exposure to COVID-19, or for funeral costs due to COVID-19; the gross household income of the impacted homeowner does not exceed 150 percent of the area median income after hardship, unless this requirement for eligibility is waived by the mortgage lender; and the impacted homeowner’s bank accounts collectively contain less than six months’ reserves of the impacted homeowner’s gross household income for 2019. 

Another bill, Assembly Bill 5685, would protect low-income, moderate-income, and middle-income households from residential evictions based upon nonpayment or habitual late payment of rent that accrued during the covered period, which began on March 1, 2020, and would last until the end of July 2021. The legislation would require that payments made by a tenant after the covered period ends would be credited first to the current month’s rental obligation, and any balance would be credited to any arrearage owed by the tenant.  The bill provides that amount of rent due to a landlord during the covered period would be considered civil debt and could be pursued as a money judgment.

Under AB 5685, any amount of unpaid rent due either prior to the start of the covered period or after the covered period ends may be pursued in the manner allowed by law for any other landlord-tenant action for rent due outside of the covered period.  However, the bill would provide low-income household tenants with continued protections from evictions for the month of August 2021 if they pay 50 percent of their rent for the month of August 2021. The remaining 50 percent of the low-income tenant’s rent due for that month would be considered civil debt.  Additionally, the bill would provide moderate-income household tenants with continued protections from evictions for the month of August 2021 if they pay 75 percent of their rent for the month of August 2021. The remaining 25 percent of rent due for that month would be considered civil debt. AB 5685 would also prohibit a landlord from imposing any late fees for rent payments not made during the covered period.

The legislation would further require that all pending landlord-tenant actions alleging nonpayment or habitual late payment of rent that accrued during the covered period be stayed and dismissed upon certification that the tenant is low-income, moderate-income, or middle-income and that the reason for filing was nonpayment or habitual late payment of rent during the covered period. AB 5685 would also require the Superior Court to return or credit to the landlord all fees paid by the landlord to file such cases. 

Key Takeaway

With the future of the residential eviction moratorium still uncertain, we encourage lenders and landlords to stay up to date on legal developments at both the state and local level. We also advise working with experienced counsel to determine what alternative legal strategies may be available.

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, Matthew Kane, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.