TRENTON – A state appeals court has upheld an executive order Gov. Phil Murphy issued early in the pandemic that allowed tenants to use their security deposits to pay their rent.

A group of landlords sued, claiming that the order violated the state constitution and state law by interfering with residential lease contracts. The court found the order is a “valid use of the governor’s emergency powers” as the Disaster Control Act permits it due to a “widespread economic emergency.”

“It gives tenants an opportunity to pay rent using their own funds held by landlords as security deposits; it does not hinder landlords' ability to obtain judgments for unpaid rent or damages; and it is time limited, inasmuch as it terminates two months after the end of the pandemic,” said the appeals court. “Moreover, it is one of many measures meant to aid both landlords and tenants to financially survive the pandemic.”

The executive order, issued in April 2020, was among those lifted this month under the law signed in June that ends the public health emergency. However, the order’s effects remain in place until December, so the appeal was not dismissed as moot.

Bassam Gergi, staff attorney for Fair Share Housing Center, was pleased by the failure of the “radical legal challenge” that could have led thousands of families to lose their homes and suffer damage to their credit worthiness.

“The published opinion is an unequivocal win for tenants' rights and the need for determined governmental action to protect them from displacement,” Gergi said.

Three landlords or groups of landlords from South Jersey sued over the executive order. One, in Glassboro, said they discovered more than $1,800 in damage after the tenants left having already tapped their security deposit to pay rent. Another in Vineland is owed $14,000, as the tenant made only one partial rent payment after April 2020.

Jared McClain, litigation counsel for the New Civil Liberties Alliance, said the decision sets a bad precedent.

“No law or contract in New Jersey is safe now whenever the state faces an economic downturn,” McClain said. “For years to come, New Jersey governors can cite today’s decision to excuse their continued accumulation of power, to the detriment of civil rights and our constitutional structure.”

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The same group of landlords have a similar case pending before a federal appeals court. U.S. District Court Judge Noel Hillman granted the state’s request to dismiss the lawsuit in March, but their lawyers are seeking to have the lawsuit reinstated.

Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at michael.symons@townsquaremedia.com.

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