Articles Tagged with NJ Landlord-Tenant

On April 13, 2020 at 9:00am, the NJ Economic Development Authority’s Small Business Emergency Assistance Loan program will go “live” for online applications. NJ landlords and property managers suffering from or anticipating an immediate reduction in rental income should seriously consider applying for a loan. These loans have fairly straightforward eligibility criteria and favorable repayment terms. The following is a basic primer on the borrower qualifications and loan terms.

Who Can Apply: Eligible small businesses check all of the following boxes:

  1.  Have a physical commercial location in NJ (no home offices);

On March 27, 2020, President Trump signed the COVID-19/Coronavirus Rescue bill or “CARES Act” into law.  The CARES Act has important implications for borrower/landlords of properties identified as “Covered Properties.” In short,  CARES Act “Covered Properties” are subject to specific eviction restrictions lasting until the end of July 2020. These restrictions are identified in Sections 4022 through 4024 of CARES.

“Covered Properties” are:  (1) properties that participate in a federal housing program or (2)  properties that have a “federally backed mortgage  loan” or “federally backed multi-family mortgage loan”.  The below table identifies the types of covered properties. The bolded terms are more common federal programs or “backed” loans.

Federal Housing Program

Federally Backed Mortgage Loan/Multi-Family Loan

•              Public housing (42 U.S.C. § 1437d)

•              Section 8 Housing Choice Voucher program (42 U.S.C. § 1437f)

•              Section 8 project-based housing (42 U.S.C. § 1437f)

•              Section 202 housing for the elderly (12 U.S.C. § 1701q)3

•              Section 811 housing for people with disabilities (42 U.S.C. § 8013)

•              Section 236 multifamily rental housing (12 U.S.C. § 1715z–1)

•              Section 221(d)(3) Below Market Interest Rate (BMIR) housing (12 U.S.C. § 17151(d))

•              HOME (42 U.S.C. § 12741 et seq.)

•              Housing Opportunities for Persons with AIDS (HOPWA) (42 U.S.C. § 12901, et seq.)

•              McKinney-Vento Act homelessness programs (42 U.S.C. § 11360, et seq.)

•              Section 515 Rural Rental Housing (42 U.S.C. § 1485)

•              Sections 514 and 516 Farm Labor Housing (42 U.S.C. §§ 1484, 1486)

•              Section 533 Housing Preservation Grants (42 U.S.C. § 1490m)

•              Section 538 multifamily rental housing (42 U.S.C. § 1490p-2)

•              Low-Income Housing Tax Credit (LIHTC) (26 U.S.C. § 42)

•              The Rural Housing Voucher Program (42 USC § 1490r)

• Federally Backed Mortgage Loan, 1-4 Family purchased or securitized by Fannie/Freddie (Note: Fannie and Freddie purchase the overwhelming majority of 1-4 family mortgages on the secondary market)

 

• Federally Backed Mortgage Loan, 5+ family  purchased or securitized by Fannie/Freddie

 

• Federally Backed Mortgage Loan or Multi-Family Loan insured, guaranteed, supplemented, or assisted in any way by the Federal Government.

 

 

 

For 120 days, measured from March 27, 2020 (in other words until July 25, 2020), landlords of covered properties cannot:

  1. Initiate/file any non-payment of rent proceedings against Tenants in covered properties;
  2. Charge/collect late fees from tenants.

This federal law preempts any state law or executive action which may have permitted the filing of non-payment cases but stayed the execution of a judgment for possession. Where New Jersey Governor Murphy’s EO106 permitted the filing of a nonpayment case, the CARES Act does not. The CARES Act specifically prohibits “any filing” or “initat[ion] of legal action to recover possession.

In short, if you are a landlord of a “Covered Property” you cannot initiate a nonpayment of rent case against a tenant, nor can you collect late fees for unpaid rent, during the time period March 27, 2020 to July 25, 2020.

If you a landlord of a property which does not meet the definition of a “Covered Property” (in its entirety) but you have tenants who receive Section 8 voucher assistance, those tenants who receive the voucher are protected by the eviction moratorium–even if other tenants are not.

Offit Kurman, P.A., maintains a broad-based landlord and property owner representation practice. In New Jersey, Offit Kurman represents landlords and property managers in maximizing return, resolving disputes and avoiding unnecessary and costly delays. The Firm’s New Jersey geographic practice area includes: Jersey City, Hoboken, Bayonne, Hudson County, Newark, Essex County, Woodbridge, Middlesex County, Paterson, Passaic County, Hackensack, Bergen County and other points across New Jersey.

The Small Business Administration administers the “Economic Injury Disaster Loan” program. This program, recently expanded to address the economic fallout of COVID-19, may be especially useful to NJ landlords, multi-family property owners and other small business suffering dramatic reductions in revenue. This program (just one of many) may aid businesses in search of liquidity.

The Economic Injury Disaster Loan Program is a component of the Small Business Act, 15 USC 636.  An eligible business must be in a “declared disaster area.”  New Jersey is, by Presidential action, a declared disaster area due to COVID-19. To qualify for an EIDL loan, the applicant must be (1) a “small business;” (2) have used/consumed “all reasonably available funds” and (3) “unable to obtain credit elsewhere”.  Importantly, principal owners (those with a 20% or greater interest in the company) and affiliate companies must also have expended “all reasonably available funds.” An approved loan carries an interest rate of 3.75%. The funds can be used for “working capital necessary to carry on…until resumption of normal operations.” The funds cannot be used to refinance debt, pay other agency loans, pay taxes or pay dividends or other non-wage compensation. This is only a summary of the basics. There are additional underwriting criteria and, of course, paperwork.

Important changes may be coming to the EIDL program. Pending federal legislation may relax the “unable to obtain credit elsewhere” requirement. Although the application can be onerous (and requires significant owner financial disclosure)  the program offers important liquidity during uncertain times.

Executive Order 107 imposes uniform restrictions on certain activities in New Jersey. Many media outlets covered the generic requirements of this Order. This post focuses on the effective of Executive 107 on the multi-family property industry.

As a general matter, EO107 requires that all New Jersey employees remain home or at their “place of residence” unless a specific exception applies. One of these exceptions is travel necessary to report to or perform a job.  The Order further requires that business “whether closed or open to the public” “accommodate’ the workforce for “telework or work-from-home arrangements.” Multi-family properties rely on the hard and essential work of porters, building maintenance staff and service technicians. It is impossible for these workers to perform their jobs remotely.

EO17 requires that businesses with workers who cannot work remotely “reduce the staff on site to the minimal number necessary to ensure operations can continue.” For the remaining minimal staff, it is required that business operations “abide by social distancing practices” and engage in the “frequent use of sanitizing products on common surfaces.”

On March 21, 2020, Governor Murphy signed Executive Order 108. The purpose of this Order is to create statewide uniformity of COVID-19/Coronavirus related restrictions. The Order invalidates “all county or municipal restriction imposed in response to COVID-19…” that any in way “will or might conflict” with the statewide restrictions imposed by Executive Order 107.  This is an important, though unfortunately necessary, Order.  During uncertain times, multi-family property owners and managers will benefit from this uniformity.

Unless specifically permitted by the Governor, municipal restrictions imposed in response to COVID-19 are invalidated. Varying curfews and county-specific bans on “worldly employment or business” are not enforceable. The only COVID-19/Coronavirus related restrictions to be followed are those imposed by the federal government and Executive Order 107. A subsequent post will address the specific effects of Executive Order 107 on the multi-family property industry. For now, the takeaway is: Make business decisions according to State-wide guidance, not local authority.

Offit Kurman, P.A., maintains a broad-based landlord and property owner representation practice. In New Jersey, Offit Kurman represents landlords and property managers in maximizing return, resolving disputes and avoiding unnecessary and costly delays. The Firm’s New Jersey geographic practice area includes: Jersey City, Hoboken, Bayonne, Hudson County, Newark, Essex County, Woodbridge, Middlesex County, Paterson, Passaic County, Hackensack, Bergen County and other points across New Jersey.

Major changes are coming to the multi-family property industry today. Governor Phil Murphy is set to sign Assembly Bill A3859. This bill prohibits lockouts during a Governor-declared State of Emergency. Once signed into law, multi-family properties owners can expect the Governor Murphy to immediately impose a lockout moratorium. It is important the landlords and tenants understand what A3859 prohibits and what it does not.

1. Eviction Actions Can Be Still Initiated: A3859 does not prevent landlords from filing eviction actions. Instead, it stays the enforcement of a judgment of possession (no lockout) until the State of Emergency lapses. Technically, A3859 requires that the Governor issue an order triggering the moratorium—but this is a near certainty.

2. The Moratorium is Not Indefinite: A3859 allows the Court to proceed with a lockout “in the interest of justice.” While this term is not defined, we can expect that eviction cases for causes other than nonpayment (damage to apartment, assault on landlord–to name two) may be enforced in the “interest of justice.” Non-payment of rent cases are the most likely to be affected. The overwhelming majority of these cases will not proceed to lockout during the State of Emergency. Unless some exceptional circumstances are present (for example, a large pre-Coronavirus panic balance; a property on the brink of insolvency and similar exceptional consequences), landlords and tenants should expect that any pending or to-be-initiated nonpayment case, will be subject to the moratorium.

On November 5, 2019, voters in Jersey City, NJ approved expansive regulations on “short term rentals” commonly listed on Airbnb, VRBO and similar sites. These regulations (codified in Chapter 255 of the Jersey City Municipal Code) permit short rentals only in limited circumstances. This post is one of series which will discuss the effects of Ordinance 19-077 on multi-family properties in Jersey City. The discussion begins with: Who can list on Airbnb after 19-077?

Chapter 255 of the Jersey City Municipal Code regulates short-term rentals after January 1, 2020. To understand the ordinance, it is first necessary to know the definition of a short-term rental. Short-term rentals are those residences which meet three conditions. First, the property must be a residential property offered for occupancy by someone other than property’s owner for less than 28 consecutive days. Second, the property must be regularly used and kept open for the lodging of  transient guests. Lastly, the property must be advertised or “held out to the public” as a place regularly rented to transient occupants. Put simply, a short-term rental is one advertised for short stays by non-owners.

After January 1, 2020, short-term rentals not specifically permitted by Chapter 255 are prohibited. Permitted short-term rentals are capped at 60 nights, unless specific owner-occupancy criteria are met.  There are only 5 categories of permissible “cap free” short-term rentals. These categories, all predicated upon owner-occupancy are:

In May 2019, the City of Jersey City made a subtle but substantial change to its rent control ordinance. This change directly impacts the profitability of affected property owners. With the passage of Ord. 19-044, Jersey City revised the definition of “Fair Return” under its rent control ordinance from “6% above the maximum…demand deposit savings account interest rate” to “2.5% above…” The new 2.5%+ “Fair Return” applies to the “equity investment in real property.” The “equity investment” is considered only the “actual cash contribution of the purchaser” at closing, plus any additional principal payments.  The Jersey City ordinance follows the “Investment-Based Standard” and is the most restrictive constitutional rent control formula.

To understand the effect of Ord. 19-044,  it is helpful to restate the amended ordinance in plain language. Stated simply, the revised rent control ordinance “guarantees” a landlord a minimum net income of 2.5%+ measured against the landlord’s cash contribution to the purchase.  In its most basic application, the formula works as follows:

Purchase Price: $800,000

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