Tenant Considerations in New Jersey Real Estate Transactions: Complications Resulting from Covid-19
Updated: Apr 29, 2021
Can a Landlord Evict a Tenant Upon the Landlord’s Sale of the Property?
Under N.J.S.A. 2A:18-61.1(l)(3), an owner of a building with three residential units or less, who has contracted to sell the property to a buyer who wishes to personally occupy the unit, has good cause for eviction, so long as the Contract of Sale calls for the unit to be vacant at the time of closing.
In other words, a landlord who is selling his or her property may seek to evict a tenant as long as the following conditions are met:
1. The Buyer intends to personally occupy the unit;
2. The Contract of Sale calls for the unit to be delivered vacant at the time of closing; and
3. The property has three residential units or less.
As stated, the Buyer must intend to personally occupy the unit post-closing. If the Buyer wishes to rent the unit post-closing to a new tenant, that is not “good cause” for eviction.
Once the landlord has met the requirements above, he or she must comply with additional requirements set forth in N.J.S.A. 2A:18-61.2(f). N.J.S.A. 2A:18-61.2(f) requires that the landlord provide the tenant with a valid two month Notice to Quit prior to initiating an eviction action. The courts require “punctilious compliance” with the notice requirements, or the eviction action risks being dismissed. Therefore, it is important that the attorneys handling the real estate transaction are familiar with the notice requirements.
In addition, before the eviction action can be instituted, the tenant’s least must have expired. A Notice to Quit may be served upon the tenant prior to the expiration of the lease, but the complaint for eviction cannot be filed until both the quit period in the Notice has expired and the actual lease has expired.
In sum, a landlord can evict a tenant if the property is being sold to a buyer who intends to personally occupy the unit. A valid two month notice is required. In addition, the complaint for eviction cannot be filed until the lease has expired.
Suspension on Most Eviction Proceedings in Light of the Covid-19 Pandemic
In light of the Covid-19 pandemic, landlord-tenant proceedings and the ability (or inability for that matter) to evict tenants has significantly changed.
On March 19, 2020, New Jersey Governor Philip Murphy issued Executive Order 106, which suspended evictions throughout the state. As a result of this Executive Order, tenants cannot be evicted from their homes until two months after Governor Murphy declares an end to the Covid-19 health crisis. Most recently, Governor Murphy extended the Covid-19 health crisis through Executive Order 222, which will expire on March 19, 2021. This means that unless the Governor extends the emergency again, or ends it early, the suspension on evictions will last until May 19, 2021.
As a result, most eviction proceedings in landlord-tenant court are suspended until further notice. On July 24, 2020, the New Jersey Supreme Court ordered that trials in landlord-tenant court continue to be suspended until further notice unless an “emergent circumstance” exists. An attorney representing a landlord may apply for an Order to Show Cause for eviction, but a trial will only be scheduled if the court determines that an emergency exists.
Options for Buyers
The suspension on the majority of evictions has caused significant complications for parties involved in real estate transactions where the property is tenant-occupied. Most Buyers do not want to purchase a property subject to a tenancy just to undertake the burden of evicting the tenant later on. In addition, some Buyers’ attorneys will advise their clients against simply closing once a Notice to Quit has been served because the mere service of a Notice to Quit in no way guarantees that the tenant will vacate.
So, what are a Buyer’s options?
Of course, a Buyer who does not wish to deal with the hassles of purchasing a tenant-occupied property may simply contract to purchase a property that is free of tenants.
However, if a Buyer is really set on purchasing a specific property that is subject to a tenancy, the Buyer’s attorney can include a contingency in the Contract that the tenant must vacate the property by a certain date (for example, thirty days after conclusion of Attorney Review). The contingency should include language to the effect that if the tenant has not vacated the property by that certain date, the Buyer has the right to terminate the Contract. In such a scenario, Sellers should work with their tenants to ensure that the tenants will leave voluntarily, even if the Seller has to provide some sort of financial assistance or incentive for the tenant to do so.
If a tenant has not vacated the property in time for closing and the Buyer closes subject to the tenancy, a Notice to Quit must have been served upon the tenant. In such a case, it will be the Buyer’s responsibility to ensure that the tenant vacates. If the tenant does not vacate once the quit period has expired, the Buyer may have to bring an eviction action against the tenant. Buyers must remember that closing subject to a tenancy where the Buyer ultimately wants the tenant out is very risky at this time due to the pause on eviction proceedings. The Buyer and Seller may agree to enter into an Eviction Escrow Agreement, in which monies are held in escrow to cover the costs associated with the Buyer evicting the tenant. However, this requires agreement by the Seller, and again, there is no guaranteed date when the courts will begin hearing eviction cases.
Lastly, there is always the possibility that the Buyer does not want the tenant to vacate. If the Contract does not call for the unit to be delivered vacant and the tenant does not leave prior to closing, the Buyer will take title to the property subject to the existing tenant. The Seller's attorney will provide the tenant with a Letter of Attornment, which will advise the tenant of the change in ownership and instruct the tenant to forward future rent payments beginning the month following closing to their new landlord. The Buyer will assume the lease with the existing tenant and the security deposit will be transferred from the Seller to the Buyer at the time of closing.
In conclusion, while the law permits evictions of tenants upon the sale of a property, the Covid-19 health crisis has essentially put a halt on such eviction proceedings. However, Buyers and Sellers do have options. As with any real estate transaction, it is important to work with your attorney to structure the deal in a way that is realistic and best suited to your needs.
The information contained in this post is for informational purposes only and is not intended to serve as legal advice. If you have any questions or would like to schedule a consultation, you may email us at firstname.lastname@example.org or call us at 201-595-0399.