New Jersey Supreme Court Relaxes Moratorium and Allows Some Commercial Landlord-Tenant Cases to Proceed

Much has been written about the need for moratoria on evictions, at both the federal and state levels, in order to avoid widespread displacement of residential tenants. Indeed, one of Governor Murphy’s very first Executive Orders – issued on March 19, 2020, just ten days after he declared a State of Emergency – was to halt all residential evictions until two months after the State of Emergency ends. Of course, the State of Emergency continues today, and thus the residential eviction moratorium also continues with no immediate end in sight.

Early on during the COVID-19 crisis, as a companion to the Governor’s Executive Order, the New Jersey Supreme Court authorized the temporary suspension of all landlord-tenant trials (both residential and commercial) as of March 16, 2020. While residential and commercial landlords could continue to file complaints to get “in the queue,” those cases could not advance to trial, and the Landlord-Tenant Court backlog today is in the tens of thousands. Some commentators predict hundreds of thousands of eviction complaints may be filed in New Jersey when the pandemic ends.

While much attention has been given to the residential eviction crisis, far less has been written about the impact of lengthy moratoria on both commercial landlords and tenants, whose cases are filed identically to residential matters in Special Civil Part of the Law Division of the Superior Court. A recent order of the New Jersey Supreme Court allows some commercial landlord-tenant matters to advance for the first time since the onset of COVID-19 halted almost all hearings. This is welcome news for commercial landlords, even though the order allows cases based on nonpayment of rent to proceed in only one of three specific circumstances: the tenant has vacated the property, the tenant’s business has permanently closed, or the landlord is facing foreclosure or a tax lien.

This is the second order that attempts to distinguish commercial and residential matters. The first order on July 14, 2020, allowed landlords to file an Order to Show Cause for eviction, and trial courts could allow these cases to proceed only where emergencies exist. That order also modified court intake procedures, “to indicate whether the case involves a residential or commercial tenancy, which information will facilitate communications and differentiated case management.” Examples of emergencies that might warrant immediate hearings include documented violence, criminal activity, or other health and safety concerns. Nonpayment of rent does not constitute grounds to proceed under the July order, except in the case of the death of the tenant. Although not specifically limited to residential tenancies, that was the primary and implicit focus.

The new order amends the July 14, 2020 order and chips away at the moratorium a bit further by allowing commercial cases to proceed in additional but still fairly limited circumstances. It contains several provisions specific to commercial landlord-tenant matters, as follows:

• The prior order entered on July 14, 2020 now specifically applies to commercial as well as residential matters and allows for commercial landlords to file an Order to Show Cause for eviction.
• In determining whether to issue the Order to Show Cause, the trial court will review the complaint and determine whether an emergency exists. Such an emergency would include not only matters such as violence against other tenants and criminal activity, but now also extend to permanent closure of a business, resulting in vacancy of the property.
• The basis of the landlord-tenant action cannot be nonpayment of rent, unless the tenant has vacated the property, the tenant’s business is not operating and will not resume operating, or the landlord is facing foreclosure or a tax lien.

If the court determines an emergency exists, it may schedule a trial. As outlined in a Notice to the Bar that accompanied the recent order, if the landlord prevails at trial, a judgment will be entered and a warrant of removal can then be issued.

While the court’s latest order will not open the floodgates, it will provide some much needed relief to commercial landlords who have found themselves unable to retake possession of premises vacated or where businesses have permanently closed. This will allow landlords to move on and seek new tenants to fill available spaces, without displacing operating businesses. It will also provide relief to landlords at risk of foreclosure or tax liens.

Some vicinages are planning steps to reduce the substantial backlog in landlord-tenant cases, including starting to hold virtual hearings and reassigning additional judges to handle them. Steps like these should also assist in beginning to ease the logjam of commercial landlord-tenant matters.

The Gibbons Real Property and Commercial & Criminal Litigation Departments stand ready to assist you in navigating the commercial landlord-tenant landscape. If you are in need of assistance in a commercial landlord-tenant situation, please contact Howard D. Geneslaw or Kevin W. Weber.