Articles Posted in Real Estate

In 1951, the New Jersey State Legislature codified the Summary Dispossess Act, N.J.S.A. 2A:18-53, et. seq., in order to afford the Courts a fast, efficient and fair way of handling Landlord Tenant disputes. In 1974, the vast majority of Landlord Tenant disputes, which involve residential tenants, became guided by the Anti-Eviction Act, N.J.S.A. 2A:18-61.1, et. seq., which sets forth special procedures for dealing with residential disputes, while still allowing the Court to follow the efficient procedure of the Summary Dispossess Act. For the past 70 years, the New Jersey Courts have operated fairly and efficiently with regard to landlord tenant proceedings. Utilizing this process, the Courts have heard the vast majority of cases within 4 weeks of the date of filing. In cases in which a Judgment for Possession has been entered, the Courts have allowed landlords to schedule lockouts to occur within about 2 weeks of the Court date (or the date when the settlement is breached).

However, on March 16, 2020, the Court’s generally efficient manner of handling landlord tenant disputes was suspended, in favor of avoiding the prospect of having tenants evicted during a pandemic. The theory behind suspending evictions was generally based on the notion that an evicted tenant would inevitably need to move in with friends or family, thus increasing the likelihood that the pandemic would spread. It was also based on the reality that, as a result of people losing jobs during the pandemic, there would be a “tsunami of evictions” once the State resumed conducting these hearings. Hence the State has allowed 14 ½ months to pass (as of the date of this article), in which no evictions (except those filed based on extreme emergencies) have been allowed to occur. During this time period, more than 80,000 evictions have been filed, and there is still no clear plan as to what will happen when the Courts re-open.

In the meantime, several tenant advocacy groups have seized upon the confusion caused by the pandemic to propose new legislation to “improve” the operation of the New Jersey landlord tenant courts. The proposals include requiring mandatory case management conferences and settlement conferences, which would be scheduled to occur prior to the Court date. These proposed measures really have nothing to do with the pandemic and if they are enacted by the New Jersey Supreme Court, they will become a permanent part of landlord tenant law. I recently met with several members of the New Jersey Special Civil Part Committee, for purposes of assembling recommendations to the New Jersey Supreme Court regarding the future of Landlord Tenant law. However, during the meeting, I found that the faction of the Committee, who represented tenants, really had no interest in agreeing to any of the recommendations of the rest of the Committee. These members could not be reasoned with and they were rather obstinate when presented with the viewpoint that the proposed changes to Landlord Tenant law were really just a tactic to further delay evictions.

In the wake of the financial disaster created by the COVID pandemic, many New Jersey landlords and tenants have become familiar with Executive Order 106, which states that no lockouts of residential tenants can occur until two months after the State of Emergency has ended.  As of the date of our last blog, it appeared that the State of Emergency would end in early July.  However, after two extensions, the State of Emergency is now scheduled to expire in September.  Of course, we cannot predict whether an additional extension will be granted, but it would be an understatement to say that we are very concerned.

Concurrent to the State of Emergency is the fact that the Courts simply cannot open due to safety concerns. Consequently, if you are one of the unlucky landlords who filed your matter after the middle of February and your matter did not get reached before the Courts closed on March 16, you may be waiting a very long time for your matter to get scheduled for trial.  We estimate that there are currently 45,000 Landlord Tenant cases in the New Jersey Courts that are still waiting for trial dates.

In the meantime, the Court is also eager to resume hearing cases and they have considered alternate ways to do so.  These methods include online hearings for those litigants who have access to computers.

During the past several weeks, our office has fielded hundreds of phone calls and emails from anxious clients (and concerned attorneys), who have all been wondering when we will resume having landlord tenant trials in New Jersey.  Unfortunately, as of now, there is still no plan as to when (and how) the Courts plan on scheduling landlord tenant trials, amidst the COVID-19 pandemic.  At this point, the decision is in the hands of the State Judiciary, which obviously has some very serious and legitimate concerns about ensuring the safety of their staff and the guests of the courthouses throughout New Jersey.  Consequently, on June 12, the Judiciary posted their Fourth Omnibus Order Fourth Omnibus Order, which establishes a schedule for resuming some Court operations, but with regard to Landlord Tenant matters, the Order sets forth that “trials continue to be suspended until further notice.”

Clearing the Backlog

Since the New Jersey Courts halted eviction hearings on March 16, they have accumulated more than 30,000 landlord tenant cases that are still waiting to be heard.  Clearing this backlog will be essential to the Court’s plan moving forward.  A few weeks ago, I participated in a conference call with the Judge and the staff of one vicinage, and the Court staff proposed that tenants would be given a survey to determine whether they would be available to appear in Court via an Internet conference.  By using this method, it has been the hope of the judiciary that a large percentage of their matters could avoid in person appearances.  Other courts have also proposed their own ideas, which have included staggering the role call times so that only a litigants would appear at a time.  In either case, it is clear that the prior method of conducting landlord tenant court, which has always involved several hundred people crowding into a room and waiting for their names to be called, will no longer work.

During the past few weeks, our office has been reporting on New Jersey’s restrictions on evictions during the COVID-19 pandemic.  At the core of these temporary measures is Executive Order 106, which generally prohibits lockouts from taking place until two full months after the State of Emergency has ended.  The State of New Jersey law does not, however, prohibit the landlord from filing eviction actions and it does not prohibit the Court from entering Judgments for Possession against tenants who cannot pay their rent.  Rather, New Jersey’s Executive Order only temporarily delays the lockouts of tenants.  In the meantime, many of our clients have asked us about a new Federal Law that prohibits evictions and whether it is similar to the New Jersey law.  The Federal Law, titled H.R. 748 (also known as the “Cares Act”) imposes several restrictions that are seemingly more onerous than the New Jersey law; however, the Federal Law is really much more limited in the scope of the people who will be affected by it.

In the Cares Act, Section No. 4023, entitled “Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans,” the Statute reads “a multifamily borrower that receives a forbearance under this section may not, for the duration of the forbearance, evict or initiate the eviction of a tenant from a dwelling unit located in or on the applicable property solely for nonpayment of rent or other fees or charges; or charge any late fees, penalties, or other charges to a tenant…”  The Statute further states that “a multifamily borrower that receives a forbearance under this section may not require a tenant to vacate a dwelling unit located in or on the applicable property before the date that is 30 days after the date on which the borrower provides the tenant with a notice to vacate and may not issue a notice to vacate… until after the expiration of the forbearance.”    While Section 4023 appears, at first glance, to indicate that landlords should not charge late fees or file evictions at this time, it is important to note that Section 4023 only applies to landlords of multifamily properties with Federally backed loans, in cases where the landlord has asked for a forbearance of the loan.

Similar to Section 4023 of the Cares Act, Section 4024 of the Cares Act also generally applies to landlords of multifamily properties with Federally backed loans.  However, Section 4024 contains no statement limiting its scope to just properties in which the landlord has asked for a forbearance on the loan.  The text of Section 4024 further reads that “During the 120-day period beginning on the date of enactment of this Act, the lessor… may not… initiate a legal action to recover possession… from the tenant for nonpayment of rent or other fees or charges…”  Put simply, under Section 4024 of the Cares Act, if you are a landlord a multifamily building and you have a Federally backed loan, you cannot file an eviction prior to July 29, 2020!

We are in a difficult and uncertain time and I hope everyone is staying safely at home.  In the meantime, our office has been receiving daily updates from the New Jersey Supreme Court and the Legislature, concerning delays in Court dates and filing deadlines.  We have been trying to forward this information to our clients as it becomes available.  On March 19, 2020, Chief Justice Rabner signed an Order delaying the filing deadline for local property tax appeals from April 1 to a new date, which will be scheduled for 30 days following the determination that the state of emergency declared by Governor Murphy has ended.

Accordingly, if you believe your property is substantially over-assessed, and you are concerned that you may miss the April 1 filing deadline, you may still have plenty of time to file your appeal.  However, please note that the delay of the filing deadline will only apply to Tax Appeal filings where the filing deadline would have been April 1 or later.  It will not apply to those matters in which the due date for the filing was before the signing of the Court’s Order.   For instance, if your property is in Monmouth County, where the County Tax Board’s filing deadline was changed to January 15, you will not be able to file an appeal with the County Tax Board at that time.  However, if your property’s assessment exceeds $1 Million, we can still appeal the assessment directly to the Tax Court.

Coronavirus Related Valuation Arguments Will Not Be Successful In 2020 Tax Appeals

Our office remains open and we are closely monitoring the quickly developing effects of the Coronavirus (COVID-19) pandemic.  During the past few days, we have received several calls from our clients, who concerned about the effects of the moratorium on evictions.  As resources become available and new information is released, we will keep you up to date.  In the meantime, we are aware that there is a lot of seemingly conflicting information regarding delays in evictions.  In this article, we will explain the details of some of the new temporary laws that may affect our clients during the next few months. 

Filing and Scheduling Eviction Hearings

During this time, we can still file eviction actions and enter into payment agreements with tenants.  While eviction hearing dates have been slightly delayed during this emergency, these delays are precautionary due to social distancing requirements, and is not related to economic factors.  Therefore, we expect that the New Jersey Courts will resume conducting eviction hearings as soon as it is deemed safe to resume public gatherings.

On Sunday, March 15, 2020, our office published an urgent update regarding some of the recent emergency measures that had been instituted by the New Jersey Judiciary in order to limit the spread of the coronavirus.  Our article specifically focused on landlord tenant proceedings, which are usually grouped together by the Court in high volume, with as many as 300 cases being heard on a single date.  In light of the recent health risks associated with large groupings of people, the Judiciary had decided, in the interests of caution, to delay all eviction actions, scheduled for dates between March 16 through March 27.  As of this time, we have removed that update since we believe there will be more updates coming shortly, with new legislation currently pending.  Please check often for more updates, and most importantly, please stay safe.

For nearly 50 years, most of New Jersey’s residential tenants have been protected by the vast set of Statutes, known simply as The Anti-Eviction Act (“The Act”).   Throughout the years the Act has undergone various, but generally minor, revisions.  However, amidst these changes, eviction complaints based on non-payment of rent have remained relatively straightforward.  Most landlords are aware of the following two rules with regard to nonpayment of rent cases:

  1. If the tenant pays the rent that is due by the day of the eviction hearing, the eviction action must be dismissed.
  2. If the tenant does not pay the rent that is due by the day of the eviction hearing, the landlord shall be awarded a Judgment for Possession, and may file the appropriate application to schedule a lockout of the tenant.

Our clients often ask us about the benefits of transferring their rental properties into a Limited Liability Company (L.L.C.).  While LLCs and other corporate entities offer some degree of protection from the personal liability, there are a myriad of factors that must be considered in making the decision to transfer your properties into one of those entities.

Due on Sale Clause

We will start our discussion with a familiar concept that owners often overlook when deciding to transfer their properties to an LLC.  In cases where the property is encumbered by a mortgage or loan, it is extremely likely that the loan document contains a “Due on Sale” clause.  This provision, contained in nearly all loan agreements, sets forth that, upon the sale of the property, the lender may require the borrower to pay the full balance of the loan.  While this clause is clearly intended to protect the lender in the vast majority of sales, where the property is sold to a completely unrelated party, it can also be invoked in cases where the owner is merely trying to deed the property to corporate entity in which the owner remains a member or shareholder.   Accordingly, in all cases where the owner intends to deed a mortgaged property to an L.L.C., the owner should first consult with the lender to get a decision in writing whether the deed transfer would trigger the due on sale clause.

Tenants who smoke in their apartments and in the common areas of their apartment buildings presents a major problem for landlords of multiple dwelling buildings. Inevitably, the smoke from one apartment will leak into neighboring apartments, leading to complaints and possible move-outs from non-smoking tenants, who generally find the smell of cigarette smoke to be abhorrent.  This problem has been largely vitiated, however, as the use of cigarettes has declined substantially during last 30 years.  Unfortunately, the New Jersey legislature will soon create a new problem since it has introduced new legislation to legalize marijuana.  Unlike the other states that have enacted the similarly misguided legislation to legalize marijuana during the last five years, New Jersey has the unique problem of having a significant portion of its population living in multiple dwellings.  Marijuana smoke, like tobacco smoke, causes a substantial annoyance to those who do not choose to use these harmful products.

Historically, the legislature has allowed for the eviction of a tenant for the mere use of marijuana or any illicit drugs in the residential dwelling.  N.J.S.A. 2A:18-61.1(n) provides for the eviction of a tenant who “hasbeenconvictedoforpleadedguiltyto… anactwhich… wouldconstituteanoffenseundertheComprehensive DrugReformActof1987…involvingtheuse,possession,manufacture,dispensingor distributionofacontrolleddangeroussubstance.”  Similarly, N.J.S.A. 2A:18-61.1(p) allows for evictions for the same offense, even without a conviction, provided that the offense can be proven by the preponderance of evidence in the landlord tenant action.

However, when marijuana becomes legal, the curative provisions of N.J.S.A 2A:18-61.1, which have been designed, in part, to avoid the problem caused by tenants who use marijuana, will no longer be actionable.  Put simply, a landlord cannot evict a tenant for using a drug, which is no longer illegal.  Therefore, landlords must immediately consider writing new lease provisions in order to avoid these problems before they happen.