COVID-19: NJ Executive Order 128 allows for the use of Security Deposits to pay for Rental Obligations

Late last week (April 24, 2020), NJ Gov. Murphy signed Executive Order No. 128 (“EO”). The EO takes effect immediately and will remain in effect until the end of the public health emergency established by Executive Order No. 103 (2020). The EO applies in the context of residential leases (not commercial leases, given the ambit of the Security Deposit Act).

The EO allows residential tenants to use their security deposit for the payment of rent (per N.J.S.A. 46:8-19 et seq., a security deposit and any accumulated interest and earnings of such deposit remain the property of the tenant).

Upon a tenant’s written request, which may be an electronic communication, a security deposit that is governed by the provisions of N.J.S.A. 46:8-19 et seq. and the tenant’s portion of any interest or earnings that have accumulated may be applied or credited toward rent payments due during the public health emergency or up to 60 days after the public health emergency terminates. The use of a security deposit for the payment of rent will NOT be considered a violation of N.J.S.A. 46:8-19 et seq.

After a tenant has applied or credited the security deposit, interest or earnings to pay rent for the duration of the tenant’s current lease, the landlord can still charge the tenant any money the landlord expends that would have been reimbursable by the security deposit.

Per the EO, the tenant is NOT obligated to make any further security deposit relating to the current term of the contract, lease or license agreement.

If the tenant and landlord extend or renew their contract, lease or license agreement, the tenant will then be required to replenish the security deposit in full if it was previously used for the payment of rent, on the LATER of (A) the date that is 6 months following the end of the public health emergency and (B) on the date on which the current contract, lease or license agreement is extended or renewed.

Note: Pursuant to an earlier Executive Order, EO 106, residential evictions and foreclosures have been halted (i.e., “stayed”) for the time being until the public health emergency has been lifted by the Governor.

Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.

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If you have any questions about this post, please contact Brad A. Molotsky, Paul Josephson, Elizabeth Mincer, Jimmy Greenberg or the attorney in the firm with whom you are regularly in contact.

Be well and stay safe!