The Impact of COVID-19 on New Jersey Commercial Real Estate Transactions.
The COVID-19 pandemic has had a major impact on commercial real estate transactions in New Jersey. Most significantly, many commercial landlords and tenants in New Jersey are experiencing the financial repercussions from the coronavirus and governmental shut down orders which has prompted requests from tenants for forbearance, concessions or forgiveness of lease payments or termination of the lease entirely. In New Jersey, while the Governor has signed an Executive Order providing some relief to residential tenants during the pandemic, there is no parallel legislation or executive orders applicable to to address commercial landlord/tenant issues.
At DHD, we have represented both commercial landlords and commercial tenants in New Jersey facing economic hardship. The economic shut down has presented significant challenges to both commercial landlords and tenants and we understand the legal and financial issues resulting from the COVID-19 pandemic and governmental shut down in New Jersey.
As a tenant whose business has been deemed “non-essential” by the government, this means no foot traffic in the leased space, a significant decline in revenue, and resulting constraints on the ability of the tenant to make lease payments. While many leases contain “force majeure” provisions, it is essential that you, as a tenant, seek legal advice to determine whether these or any other provisions of your lease provide you with the ability to forbear lease payments or even terminate the lease without default as a result of the pandemic. We have significant experience in assisting commercial tenants in New Jersey facing this situation and have successfully negotiated early lease terminations at reduced costs offering some relief to commercial tenants.
Commercial landlords in New Jersey are also significantly impacted by the COVID-19 pandemic. Oftentimes, landlord leased property is financed and it is the tenants’ lease payments that pay the mortgage. What action should a landlord pursue? File an eviction action? Agree to rent concessions? Each individual circumstance is unique and requires thoughtful analysis and legal advice. The Governor’s Executive Order in New Jersey does not apply to commercial leases, therefore, landlords are not prohibited from filing an eviction action if the tenant defaults in the payment of rent. While this is a consideration, it may not be the most prudent course of action. Furthermore, the lease may contain force majeure provisions or other tenant defenses to payment of rent that should be analyzed and interpreted by counsel prior to the landlord taking any action in New Jersey. In some cases, a concession of rent may be considered by the landlord. However, a rent concession should not be agreed to automatically and should be done in conjunction with an overall review of the circumstances applicable to the particular tenant and the lease between the parties.
Whether representing a commercial tenant or a commercial landlord in a lease dispute arising due to COVID, DHD has the expertise and legal knowledge to assist our commercial real estate clients in seeking amicable resolutions to lease challenges and navigating the unique circumstances resulting from the pandemic in New Jersey.
Please contact Lori Ciarrocca Duffy, Esq., if you are a commercial tenant or commercial landlord and have any questions about your rights or obligations under a commercial lease arising from the COVID-19 pandemic in New Jersey.
The information is provided solely for information purposes. It should not be construed as legal advice on any specific matter and is not intended to create an attorney-client relationship. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based upon particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.
