Over the past several months, landlords and tenants alike have seen dramatic changes to the rules and regulations applicable to, among other things, the commencement and enforcement of eviction proceedings across both New York and New Jersey. These are supplemental to the federal protections available to tenants on a nationwide basis via the CARES Act which states that a landlord may not require a tenant to vacate their property until 30 days after giving the tenant adequate notice to do so. To provide some clarification and, hopefully, peace-of-mind to renters in both states, the following is a breakdown of the eviction protections available to tenants in each jurisdiction.
New York Eviction Proceeding Overview
The coronavirus has resulted in the deaths of approximately 224,000 Americans, including over 23,000 residents of the New York City Metro area alone. In an attempt to stem the flow of the pandemic, starting in March 2020, New York Governor Andrew Cuomo and New York City Mayor Bill DeBlasio implemented sweeping emergency protocol that put strict limitations on non-essential operations and social events. The subsequent economic distress prompted the Chief Administrative Judge of the Courts to issue numerous administrative orders setting certain protocol intended to temporarily pause residential and commercial eviction proceedings being processed by the state’s judiciary system. In the residential sector, on October 12, 2020 residential landlords were given the go-ahead to proceed with the submission of residential nonpayment and holdover eviction measures as Administrative Order 231.20 expired. However, residents should note that even if the landlord wins in a summary proceeding, a moratorium is still effective that prohibits the execution or enforcement of a judgment or warrant decided against a residential tenant through January 1, 2020 per Executive Order 202.66. On the commercial side of the house, landlords are still barred from commencing eviction proceedings—as Executive Order 202.69 blocks the initiation of a summary proceeding or enforcement of an eviction of any commercial tenant for nonpayment of rent all the way through its expiration on November 13, 2020. Additionally, Executive Order 202.70 offers extended protection for commercial renters by prohibiting the eviction of any commercial tenant for nonpayment until the start of 2021. There is a slight caveat for commercial properties, in that commercial nonpayment proceedings that were started before March 17, 2020 will be allowed to proceed. Tenants may also be able to rely upon contractual force majeure clauses as a basis to excuse performance. Although there is limited pandemic-specific precedent, New York judges have historically applied a narrow interpretation of force majeure clauses, meaning that nonperformance will only be excused if the force majeure clause specifically includes the event that prevents a party’s performance. Accordingly, leases with force majeure clauses that do not specifically include the words “pandemic” or “epidemic” will likely be insufficient to support a force majeure defense.
New Jersey Eviction Proceeding Overview
On March 19, 2020, New Jersey Governor Philip Murphy signed Executive Order 106 into effect. This legislation put a temporary halt on evictions until two months after the Governor declares an end to the COVID-19 health crisis. The Governor has already extended the official public health emergency status on numerous occasions—most recently via Executive Order 191, which is set to expire on November 25. If the Governor opts to not extend the emergency a further time, the eviction moratorium would expire at the end of January 2021. Still the state eviction moratorium does not impact the amount of rent due and tenants will eventually be obligated to repay any outstanding balance. Further, the moratorium does not block court proceedings, it solely acts to prevent lockouts and removals of tenants. On July 24, 2020 the New Jersey Supreme Court announced that the majority of landlord-tenant litigation would be suspended indefinitely. The order explicitly states, however, that trials are allowed to proceed when the court makes the determination that it is necessary to do so. Per the order, nonpayment of rent is not one of these instances unless the tenant passes away.
Judicial Foreclosure—Benefits for Property Owners
Both New York and New Jersey are referred to as judicial foreclosure states. This means that lenders looking to evict and foreclose an owner from their property due to delinquency have to first go through the considerably lengthy judicial process before doing so. This isn’t the case in every state. Some states are called non-judicial states where lenders can pursue expedited methods of evicting delinquent borrowers and foreclosing upon their homes.
Although foreclosure formally terminates a homeowner’s property rights, that doesn’t necessarily mean they will end up leaving right away. In fact, depending on the type of foreclosure, the foreclosed property’s buyers may be forced to evict the old owners. Judicial foreclosures are frequently paired with eviction notices that are executed by law enforcement soon after foreclosure. In nonjudicial foreclosures, separate eviction suits must be filed by foreclosure buyers and four or more months might be needed to evict old owners.
In judicial foreclosure states, foreclosed property owners benefit from extended redemption periods following their foreclosures. Over the course of these redemption periods, foreclosed property owners can potentially get back their homes by paying up all outstanding loan balances to include any lender and foreclosure buyer costs, typically with interest. Nonjudicially foreclosed property owners in states like California, however, don’t receive a right of redemption period and therefore can lose their properties for good in a much shorter timeframe.
At Alpha Funding Partners, we understand this year has brought a lot of unknowns to the world, including the hard money industry. We are here to help educate our borrowers and advise them throughout this process. When you work with Alpha, not only do you get the best combination of rates and leverage, you also get a trusted partner who will look out for your best interest.