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New Jersey Courts Make it Easier for Commercial Landlords to Change the Locks and for Lenders to Foreclose

The COVID pandemic began in March of 2020 and placed many individuals, businesses and mortgage lenders in circumstances which seemingly only ever existed in their wildest dreams. Among those impacted by the pandemic, were landlords and tenants, both residential and commercial.

Landlords needed to continue collecting rent, or have the ability to find tenants who could pay rent, and tenants needed relief in order to prevent them from being evicted during the challenging circumstances presented by the pandemic.

At the beginning of the pandemic, Governor Murphy issued an Executive Order in March of 2020, to address the landlord/tenant challenges, which stayed residential evictions and foreclosures; however, landlords were still permitted to file actions for summary possession against their commercial tenant. That being said, commercial landlord/tenant matters were not heard immediately. Even when these matters were eventually heard, enforcing any judgment obtained against the tenant was a near impossibility during the pandemic.

On February 5, 2021, New Jersey Courts issued a First Notice to the Bar, explaining an Order entered by the Chief Justice of the New Jersey Supreme Court, stating, as it pertains to commercial landlords, that landlords may apply for an Order to Show Cause for eviction in emergent circumstances, however the basis of the Order to Show Cause cannot be nonpayment of rent, except where the tenant has vacated the Property; the tenant’s business is not operating and will not resume operations; or the commercial landlord is facing foreclosure or a tax lien.

This First Notice provided some hope to landlords, but more is needed for landlords to freely commence eviction proceedings, especially for non-payment. Depending on the terms of a tenant’s lease, commercial tenants may be able to avail themselves of various defenses in response to an Order to Show Cause including but not limited to Force Majeure and impossibility of performance.

On February 15, 2021, New Jersey Courts issued a Second Notice to the Bar which simply stated that “Effective February 15, 2021, courts will resume post-trial activity, including issuance of writs of possession, for commercial foreclosure matters.” In light of the continued hurdles for landlords to enforce the eviction of commercial tenants, the February 15, 2021 notice is likely an unsettling sight for commercial landlords/property owners because it means that property owners behind on mortgage payments are at risk of losing their property through foreclosure proceedings.

The slow loosening of restrictions on commercial evictions and foreclosures is likely a welcome sight for lenders, but is cause for concern to tenants who are unable to keep up with rent payments and landlords who are behind on mortgage payments.

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