New Jersey Law Journal: This NJ Order Just Made It Easier to Evict, Foreclose on Commercial Properties

New Jersey courts are gearing up to allow more commercial foreclosures and evictions after the pandemic put many cases on hold.

A revised order, made public this week, is likely to generate an uptick in activity related to evictions of commercial tenants, some attorneys said.

On Monday, the New Jersey judiciary issued an order expanding and clarifying landlords’ ability to obtain trials in commercial landlord-tenant matters. And on the same day, the judiciary announced that state courts will resume issuing post judgment writs of possession incommercial foreclosure cases.

While the court’s orders won’t be welcome news for commercial tenants that are delinquent on rent or commercial property owners whoare not current on mortgage payments, real estate law experts said the measures bring the courts closer to pre-pandemic operations, helping to return the commercial real estate business to its normal course of business.

“It’s slowly starting to return things back to normal, or maybe the new normal,” said Christopher Dzwilewski, a real estate attorney at Scarinci Hollenbeck in Lyndhurst. “At the end of the day, when things don’t work well, everyone’s in a losing position.”

In the landlord-tenant notice, the court said that commercial landlords may seek eviction of a tenant under emergent circumstances for nonpayment of rent only if the tenant has vacated the property, the tenant’s business is not operating and will not resume operations, or if nonpayment of rent causes the landlord to face foreclosure or a tax lien.

The order represents an expansion of a July 2020 order that allowed commercial or residential landlords to make an application for an eviction trial if a tenant is destroying the property or engaged in illegal activity. The judiciary placed a moratorium on commercial andresidential landlord-tenant trials in March 2020.

The order will allow certain commercial landlords to proceed, such as the owners of properties housing restaurants that lost business due to COVID-19 and were unable to keep going based only on takeout orders, said Michael Geraghty, a lawyer at Sills Cummis & Gross in Newark who handles commercial landlord-tenant issues. In some cases, property owners complain to him that their tenant seems to have vacated the premises, but they can’t take possession of it without a court order, he says.

“It’s a help to that category of landlord who are sitting with tenants who have stopped conducting business,” said Geraghty.

However, the landlord-tenant order won’t help property owners whose commercial tenants remain in business but don’t pay rent, Geraghty said.

While that order will provide relief to some commercial landlords, it has its limitations, and the order-to-show-cause process is “more arduous” than the pre-pandemic protocol for eviction complaints, said Francis M. Giantomasi of Chiesa Shahinian & Giantomasi in West Orange.

Under the governor’s executive orders, commercial landlords have been unable to get possession of their properties from nonresidential tenants since the onset of the pandemic last March, said Giantomasi.

But even with the order, landlords still face an uphill battle to regain possession, said Giantomasi. The burden to even have an eviction case heard is still a high one, since a court will have to find that emergent circumstances exist before it hears the landlord’s case on its merits, he said.

“For landlords having difficulty collecting rent from commercial tenants, this newest order may not provide them with the relief they are looking for just yet,” Giantomasi said. “But as the state continues its rebound from the effect of the pandemic, additional aid for landlords may be on the horizon,” he said.

Dzwilewski, of Scarinci Hollenbeck, said he thinks the landlord-tenant order will prompt an uptick in commercial evictions, but not until the second half of 2021, given the heavy burden of showing that the tenant’s nonpayment of rent is impacting the landlord’s finances.

In the foreclosure notice, the judiciary said courts will resume post trial activity, including issuing writs of possession, for commercial foreclosures starting Feb. 15. Previously, such post trial activity was stayed under Gov. Phil Murphy’s Executive Order 106, issued in March 2020.

Joshua Howley, another Sills Cummis lawyer who handles commercial foreclosures, said the order concerning foreclosures was an attempt to address discrepancies in practices employed around New Jersey. He said some counties have not conducted sheriff’s sales, due to confusion over proper procedures, during the pandemic.

But even though the order should allow commercial lenders to carry out foreclosures to their conclusion, Howley doesn’t anticipate any big bump in commercial foreclosures as a result.

“I don’t view the notice to the bar opening the floodgates on foreclosures.” The order “will provide clarity for all the involved parties—lenders, borrowers and sheriffs—that it is OK to proceed. It will allow commercial foreclosures to head to a conclusion. I don’t think it’s good for anyone that commercial properties are in limbo,” said Howley.

Reprinted with permission from the February 10, 2021 issue of the New Jersey Law Journal. © 2021. ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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