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Governor Murphy Permits Tenants to Apply Security Deposit to Pay Rent During COVID-19 Pandemic
Governor Murphy Permits Tenants to Apply Security Deposit to Pay Rent During COVID-19 Pandemic

In response to the current COVID-19 pandemic, on Friday, April 24, 2020, New Jersey Governor Phil Murphy issued Executive Order 128, which allows residential tenants to apply the full amount of the tenant’s security deposit (plus all accrued interest) to the payment of any rent or late fees that are due or owed during the period of the Public Health Emergency, as well as during the moratorium on evictions established by Executive Order 106. Governor Murphy stated that the purpose of Executive Order 128 is to provide additional protections to individuals and families experiencing financial hardships as a result of the COVID-19 pandemic.

Specifically, the Order is intended to protect families struggling to pay rent due to financial hardship during the ongoing Public Health Emergency and the State of Emergency, but who may also remain at increased risk for eviction upon the termination of Executive Order No. 106. The Order is to remain in effect until 60 days following the end of the Public Health Emergency. 

The Order applies to residential tenancies and removes the bar on using security deposits for rent set forth in the Security Deposit Act. The grounding for the Order is that pursuant to the Security Deposit Act, security deposits – and the interest accumulated thereon – are in fact the property of the tenant. As such, the Order states in pertinent part that, “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 upon termination of Executive Order No. 106.”  The Order does not extend protections to commercial tenancies.  

The Order allows a tenant to apply a security deposit, plus accrued interest, to rent upon written request to the landlord. The landlord must apply the security deposit and interest to the rent upon the receipt of said request from the tenant. The Order further specifies that once the security deposit and interest are applied to rent, the tenant is not obligated to replenish the security deposit in full until the date that is six months following the end of the Public Health Emergency established by Executive Order No. 103 (and extended by Executive Order No. 119), or on the date upon which the current contract, lease or license agreement is extended or renewed, whichever is later.    

However, it is important to note that the tenant remains personally liable for any damages that the tenant causes in the leased premises. The Order provides that the landlord may recoup from the tenant any monies the landlord expended that would have been reimbursable by the security deposit.

Executive Order 128 is intended to balance protections for tenants with the financial impact to landlords. As noted by the Governor, rental housing is a vital part of the state economy, and it affects and is affected by other aspects of the state’s economy. Landlords are encouraged to maintain clear records of the tenant’s request to apply security deposits to rent, when such credit is applied, and future requests to replenish the security deposit account, to avoid any issues following the end of the Public Health Emergency.

We will continue to monitor the situation in New Jersey regarding the rights of lease and mortgage holders, tenants and homeowners as they are impacted by governmental efforts to respond to the COVID-19 pandemic. 

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