NJ Landlords Challenge Governor Murphy’s Security Deposit Executive Order
On April 24, 2020 Governor Phil Murphy signed NJ Exec. Order No. 128 (2020). This executive order waived laws governing security deposits and allowed tenants to use their security deposits to cover their rent during the COVID-19 crisis.
Significantly, the executive order also requires landlords to use a tenant’s security deposit for rent following a written request from that tenant: The landlord does not have the option to reject this request. While the executive order does create a structure whereby the tenant must repay the security deposit, it can create situations where a landlord has no security deposit on file, and a tenant has vacated with damage or an outstanding balance. You can learn more about NJ Exec. Order No. 128 (2020) by clicking here.
As one might imagine, the executive order has caused some frustration in the landlord community, despite being mostly popular among tenants. Taking exception to what they perceived as Governor Murphy’s overreach, a group of landlords in New Jersey have filed suit against Governor Murphy and members of his cabinet this week. They are arguing that the executive order interferes with their ability to engage in private contracts. The plaintiffs in this case own residential rental properties in Southern New Jersey. As landlords, the plaintiffs received security deposits from their tenants to protect against damages caused by the tenants during their tenancies.
Filing their complaint in Cumberland County, the group maintains that their case “is about the Governor’s abuse of power. Exceeding any authority by the citizens of New Jersey, the New Jersey Legislature, or the New Jersey Constitution, Governor Murphy has interfered with the contractual rights and obligations of private citizens.” Plaintiff’s Complaint ¶ 3.
Clarifying that their question is not one of agreement or disagreement with the policies Governor Murphy has enacted or their relative effectiveness or ineffectiveness. Rather, these landlords posit that their case:
goes to the heart of our constitutional form of government and the separation of powers. This case focuses explicitly on whether the New Jersey Governor can rely on his own declared public-health emergency to assume authority neither the state Constitution nor the legislature ever granted to waive or amend provisions in private contracts, as well as to override and amend explicit statutory provisions as he chooses.
Id. at ¶ 4. These landlords are asking the court to “carry out and protect our constitutional framework.” Id. at ¶ 10. They are asking for an order declaring that the Governor neither has “the power to issue Executive Order 128” nor the power to interfere with their right to contract. Id. at ¶ 11.
Presently, it is unclear how this case will play out in the courts. It is not unheard of for the courts to invalidate otherwise popular laws as governmental overreach. State statute grants the Governor expanded power during a Public Health Emergency. But it is unclear whether these powers provide the Governor with the right to interfere with contracts—including lease contracts. COVID‑19 presents new and interesting challenges, and many tenants lack the ability to pay their rent. As such, we may see the courts err on the side of preserving NJ Exec. Order No. 128 (2020). It is not a stretch to say that, should the court invalidate this executive order, we may see the ruling create a domino effect overturning even more.
The information in this Client Alert 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 on particular circumstances. Each legal matter is unique, and prior results do not guarantee a similar outcome.
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