An appeals court on Tuesday defended Gov. Phil Murphy’s use of an executive order to allow tenants hit by the COVID-19 pandemic to use their security deposits to help pay rent.
The appellate judges rejected an appeal by five landlords and three businesses who argued that the order, issued last April, exceeded Murphy’s authority and violated their constitutional rights.
The court determined that Murphy was authorized under state law to exercise emergency powers such as allowing security deposits to be used as rent in his efforts to protect public health during the pandemic. And it dismissed the claims that the order violated several amendments to the state Constitution.
“In sum, we conclude that EO 128 constitutes a valid exercise of gubernatorial power pursuant to the Disaster Control Act,” the court wrote, in a 48-page opinion.
Murphy’s executive order was one of several issued in 2020 that aimed to protect renters and homeowners from eviction or foreclosure because of job losses or income reduction during the pandemic. They included EO 106, issued in March 2020, which prevented eviction for nonpayment of rent until two months after the declared end of the public health emergency.
Although the public health emergency has now officially ended, the eviction ban remains in place until the end of this year unless it is overturned by pending legislation (S-3691) that would end the moratorium on Sept. 1 except for low- and moderate-income people who applied for rental assistance.
Governor acted within bounds
In its ruling, the court noted that Murphy justified the security-deposits order by saying that tenants who suffered a loss of income as well as increased health care expenses during the pandemic should be able to use their deposits to help pay rent.
Tenants hit by COVID-19 may also be penalized by late fees or negative credit reporting if they were unable to pay rent on time, and so should be able to use security deposits, which remain their property even though they are held by landlords in escrow, Murphy said at the time.
“Enabling individuals to pay portions of their rent with the security deposit they own will allow those individuals to mitigate the consequences regarding evictions and accumulation of interest and late fees” after the eviction ban is lifted, the order said.
The court said the order sought to protect landlords by allowing them to recoup from tenants any expenses such as damages that would have been paid by the security deposit. It also required tenants to replenish the deposits if they renewed a lease, and timed the effective date of the order to the end of the health emergency.
Judges reject constitutional objections
The case stems from a suit filed against Murphy, Health Commissioner Judith Persichilli, and former Attorney General Gurbir Grewal by landlords in the South Jersey towns of Mullica Hill, Glassboro, Vineland and Millville.
The Glassboro plaintiffs, Charles Kravitz and Dawn Johanson-Kravitz, leased their property to four Rowan University students, three of whom asked in June last year to use $500 each of their security deposit to pay rent, the ruling said. After the tenants left, the landlords discovered damage they said cost $1,854 to fix.
The plaintiffs also argued that Murphy’s order violated their rights under constitutional amendments covering separation of powers, contracts and due process.
The appeals court rejected all four arguments, upholding a ruling by a lower court in March.
“After carefully considering each argument, we conclude that none of them warrant setting aside EO-128,” the court wrote.
Praise for ruling
Fair Share Housing Center, which fights against discrimination in housing rights for the New Jersey poor, praised the ruling.
“The published opinion is an unequivocal win for tenants’ rights and the need for determined governmental action to protect them from displacement,” the group said in a statement. “At a time when the global pandemic threw millions out of work, the Murphy administration worked to protect New Jersey renters from being unhoused. The executive order was an important measure that gave families a meaningful tool to stay current on their rent, and avoid any impact on their credit or any late-payment fees.”
Before the ruling, a coalition of civil rights groups — Fair Share Housing Center, Lawyers’ Committee for Civil Rights Under Law, Housing & Community Development Network of New Jersey, New Jersey State Conference of the NAACP and the Latino Action Network — argued in a friend-of-the court brief that the executive order was one of a series of unprecedented steps taken by governments at all levels to fight the effects of the pandemic.
They called the order a “reasonable and appropriate response to a national public health emergency, and it easily passes constitutional muster under longstanding precedent.”
David Brogan, executive director of the New Jersey Apartment Association, which represents large landlords, did not respond to requests for comment on the Appellate Division decision.