The $ 2 billion time bomb that drove tenants and landlords to the brink


Jasco Management, which owns dozens of small apartment buildings in Jersey City, maintains a ledger that illustrates how New Jersey’s coronavirus eviction moratorium has hammered homeowners.

On one side of the register, there are expenses: utilities, insurance, garbage collection, mortgages and property taxes. Flip the income page and there’s a list of 50 tenants who haven’t paid rent for over a year. According to Dennis Branflick, vice president of Jasco, they range from low-income families who are clearly struggling to make ends meet to well-heeled millennials.

“I have someone owe me $ 26,000 and it goes down from there,” said Branflick, going through a list that totals $ 500,000 in unpaid rent. “I have a few tenants with large balances and they haven’t really paid anything since the start of the pandemic. They stopped answering calls and did not ask for rental assistance.

While New Jersey’s moratorium on evictions has provided a desperately needed safety net for tens of thousands of tenants, it has also created a perfect storm that could potentially set off time bombs when Gov. Phil Murphy raises the state. emergency coronavirus.

Ending the moratorium is expected to open the floodgates on eviction cases, utility closings and property tax appeals by homeowners, which could affect New Jersey municipal services. A return to pre-pandemic policies could also be the one thing stopping a number of homeowners from filing for bankruptcy, according to industry advocates working to draw attention to their plight.

New Jersey tenants owe up to $ 2 billion in past rents, according to estimates from the New Jersey Apartment Association. Homeowners, who are still required to make payments on their loans and financing, have been barred by state and federal warrants from evicting tenants who are past due for over a year now. They also point out that other businesses – grocery stores, drugstores, fast food outlets, gas stations and mobile phone providers to name a few – have continued to bill customers for services during the pandemic.

Sandy Tuli, chairman of Livingston-based Tuli Realty, said the government unfairly prohibited landlords from collecting rents and only a handful of tenants took advantage of it.

“We want to work with people. We have people who won’t pay $ 200 or $ 300 a month and they owe me $ 20,000, ”said Tuli, who owns 3,000 rental units. “If you don’t make them pay, some of these guys won’t pay. “

Attorney Allen Hammer, who owns and manages thousands of apartments in New Jersey, New York and eastern Pennsylvania, said his investment firm had the resources to handle 10 % of its tenants. This is not the case for small landlords who depend on rents for their own monthly family income, he said.

“The landlords who served the poorest tenants, these landlords are hit hard. Many will not survive, ”he said. “Anyone who thinks that all this money is going to be paid by tenants is wrong. They’ll just move out at night and disappear.

More than 50,000 deportation cases are pending statewide and another 194,000 cases are expected by 2022, the New Jersey justice said in a recent report. Separately, 489,000 residential electricity and gas customers in arrears are ready to be disconnected, according to data analyzed by the New Jersey Division of Rate Counsel.

While any of the state’s 1.2 million renters can voluntarily apply for grants of up to $ 700 million in federal rent assistance, there is no direct homeowner assistance program.. And with no help on the horizon and their bills still owed, homeowners would have to flood the tax courts with appeals.

Commercial property taxes are based, in part, on net operating income. Losses from arrears may figure in the calculation of reduced tax bills, according to the state’s Division of Taxation manual for New Jersey Appraisers. Successful landlord appeals would eventually shift some of the burden of unpaid rents to private landlords.

“Landlords with larger portfolios can reallocate resources to weather the storm of rental income shortage,” said David Brogan, president of the apartments association. “If we don’t fix this problem the right way, you will see a huge number of property tax appeals. “

Brogan said the association supports a bill sponsored by Senator Brian P. Stack (D-Union City) that would end the moratorium on evictions on July 31 and establish a schedule for partial rent payments for poor tenants. and moderate, from August.

Under the proposal, landlords could attempt to recover rent in a civil court, but unlike the housing court, tenants would not be evicted for arrears accumulated during the state of emergency. In addition to federal rent assistance for rent arrears, the bill would create a $ 750 million state fund to subsidize tenants facing homelessness because they cannot pay future rents. .

“Ultimately it gives us a sense of certainty, it resolves the tsunami of evictions and past non-payment of rents, it protects tenants and manages future rents,” Brogan said.

Arguably the most controversial part of the proposal is preventing landlords from placing derogatory information about a state of emergency on a tenant’s credit report. According to landlords, this is a key incentive that could force tenants with income to pay their rent retroactively. The legislation would also prevent landlords from screening prospective tenants on the basis of non-payments or late payments during the pandemic.

Brach Eichler’s lawyer Charles X. Gormally in Roseland said the proposal upsets landlord-tenant relations, forcing landlords to wait months for civil judgments and encouraging too many heavily indebted tenants to lock out.

“The tenant doesn’t have to do anything to get these benefits,” Gormally said. “The only gaping hole is that it prevents someone from probing their (renters) credit report. It’s incredibly out of balance.

“You’re going to see a lot of tenants leave,” he said. “They’re just going to go away.”

George E. Jordan writes a weekly column on business and development in New Jersey. He can be contacted at [email protected]


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