The $2B ticking time bomb that has pushed renters, landlords to the brink


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

On one side of the register, there are expenses: utilities, insurance, trash pickup, mortgages and property taxes. Flip the page to revenues and there’s a list of 50 tenants who haven’t paid rent for more than a year. They run the gamut from low income-families who clearly are struggling to make ends meet to well-heeled millennials, according to Dennis Branflick, vice president of Jasco.

“I’ve got someone who owes me $26,000 and it goes down from there,” said Branflick, browsing a list that totals $500,000 in unpaid rents. “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 have not applied for rental assistance.”

While New Jersey’s moratorium on evictions has provided a desperately needed safety net for tens of thousands of renters, it also has created a perfect storm that potentially will ignite ticking time bombs when Gov. Phil Murphy lifts the coronavirus State of Emergency.

Ending the moratorium is expected to open the flood gates on eviction cases, utility shutoffs and property tax appeals by landlords, which could affect municipal services across New Jersey. A return to pre-pandemic policies also could be the only thing keeping a number of landlords from declaring bankruptcy, according to industry advocates who are working to call attention to their plight.

New Jersey tenants owe as much as $2 billion in back rent, according to the New Jersey Apartment Association estimates. Landlords, who still are required to make payments on their loans and financing, have been prohibited by state and federal mandates from evicting renters in arrears for more than a year now. They also point out that other businesses – grocers, drug stores, fast food restaurants, gas stations and mobile telephone providers to name a few ­– continued to bill customers for services during the pandemic.

Sandy Tuli, president of Livingston-based Tuli Realty, said the government unfairly prohibited landlords from collecting rents, and a handful of tenants are taking advantage.

“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 give them an incentive to pay, some of these guys won’t pay.”

Lawyer Allen Hammer, who owns and manages thousands of apartments in New Jersey, New York and eastern Pennsylvania, said his investment company has the resources to manage non-payments by 10% of its tenants. That’s not the case for small landlords who depend on rents for their own monthly household income, he said.

“The landlords who have been serving the poorer tenants, those landlords are being hit pretty hard. Many won’t survive,” he said. “Anybody who believes all this money is going to be paid by tenants is mistaken. They are just going to move out at night and just disappear.”

More than 50,000 eviction cases are pending statewide and another 194,000 filings are expected by 2022, New Jersey’s judiciary said in a recent report. Separately, 489,000 residential electric and gas customers in arrears are ready for disconnections, according to data analyzed by the New Jersey Division of Rate Counsel.

While any of the state’s 1.2 million tenants can voluntarily apply for grants from $700 million in federal rental assistance, there is no direct relief program for landlordsAnd without help on the horizon and their bills still due, landlords are expected to flood tax courts with appeals.

Commercial real estate taxes are based, in part, on net operating income. Losses from rents in arrears can figure in the calculation for reduced tax bills, according to the state Division of Taxation’s Handbook for New Jersey Assessors. Successful appeals by landlords would eventually shift some of the burden for unpaid rents to private homeowners.

“The landlords with larger portfolios can reallocate resources to weather the storm from the lack of rent revenue,” said David Brogan, the apartment association’s president. “If we don’t address this in the right way, you will see a massive number of property tax appeals.”

Brogan said the association supports a bill sponsored by Sen. Brian P. Stack (D-Union City) that would end the eviction moratorium on July 31 and set up a schedule for partial rent payments for poor and moderate renters, starting in August.

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

“At the end of the day, it gives us a sense of certainty, it addresses the eviction tsunami and past non-payment of rent, it protects tenants and deals with rents going forward,” Brogan said.

Arguably the most controversial part of the proposal blocks landlords from placing derogatory information from the state of emergency on a tenant’s credit report. That, landlords said, is one key incentive that could force renters with the income to actually pay their back rent. The legislation also would prevent landlords from screening future tenants based on non-payments or late payments during the pandemic.

Lawyer Charles X. Gormally of Brach Eichler in Roseland said the proposal turns landlord-tenant relations on its head, making landlords wait for months to collect civil judgments and encouraging too many tenants in deep debt to bolt.

“The tenant doesn’t need to do anything to get those benefits,” Gormally said. “The one gaping hole is it prevents somebody from dinging their (tenants’) credit report. It’s incredibly imbalanced.

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

George E. Jordan writes a weekly column on business and development in New Jersey. He may be reached at george@griotmediaworks.com