S2341

An Act concerning protections for commercial and residential tenants during emergency circumstances and amending P.L.2002, c.133.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 1 of P.L.2002, c.133 (C.2A:18-61.62) is amended to read as follows:

1. a. The Governor shall be empowered, whenever declaring a state of emergency pursuant to P.L.1942, c.251 (C.App.A.9-33 et seq.), or a public health emergency pursuant to the “Emergency Health Powers Act,” P.L.2005, c.222 (C.26:13-1 et seq.), or both, to determine whether the emergency will, or is likely to, significantly affect the availability and pricing of rental housing, or the viability of small businesses operating for retail purposes, or both, in the areas included in the declaration. If the Governor determines that unconscionable rental practices are likely to occur unless the protections afforded under P.L.2002, c.133 (C.2A:18-61.62 et seq.) are invoked, the Governor may issue a "Notice of Rent Protection Emergency" at any time during the declared state of emergency.

b. As used in P.L.2002, c.133 (C.2A:18-61.62 et seq.), “small business operating for retail purposes” means a business that employed fewer than 20 people immediately prior to the state of emergency or public health emergency declaration, and that functions primarily to serve consumers directly in the distribution of food, beverages, goods, or services, at one or more physical locations.

(cf: P.L.2002, c.133, s.1)

2. Section 2 of P.L.2002, c.133 (C.2A:18-61.63) is amended to read as follows:

2. Whenever the Governor declares a state of emergency pursuant to P.L.1942, c.251 (C.App.A.9-33 et seq.), or a public health emergency pursuant to the “Emergency Health Powers Act,” P.L.2005, c.222 (C.26:13-1 et seq.), or both, within certain areas of the State, or throughout the entire State, and issues a "Notice of Rent Protection Emergency," the following shall apply if directed in the notice:

a. Within a zone which includes the area declared to be in a state of emergency and, if so indicated in the Notice of Rent Protection Emergency extending a distance within the State and not to exceed 10 miles in all directions from the outward boundaries thereof, there shall be a presumption of unreasonableness given to a notice of increase in rental charges provided subsequent to the date of the declaration by a landlord to a tenant occupying premises which are utilized either:

(1) as a residence, when:

(a) the proposed percentage increase in rent is greater than twice the rate of inflation as indicated by increases in the CPI for the immediately preceding nine-month period. For the purposes of this section, "CPI" means the annual average over a 12-month period beginning September 1 and ending August 31 of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), All Items Series A, of the United States Department of Labor (1957-1959 = 100), for the New York, NY-Northeastern New Jersey region;

(b) if expressly directed in the notice, when there is any increase, regardless of the rate of inflation; or

(2) as commercial space by a small business operating for retail purposes, when:

(a) the proposed percentage increase is greater than the rate permitted for a residence by subparagraph (a) of paragraph (1) of this subsection; or

(b) if expressly directed in the notice, when there is any increase, regardless of the rate of inflation.

b. Within a zone which includes the area declared to be in a state of emergency and, if so indicated in the Notice of Rent Protection Emergency extending a distance within the State and not to exceed 10 miles in all directions from the outward boundaries thereof, there shall be a limitation on the amount of rent which may be charged a tenant undertaking a new lease for residential premises during the duration of the declaration of a "Notice of Rent Protection Emergency" made pursuant to section 1 of P.L.2002, c.133 (C.2A:18-61.62). The amount of rent which may be charged shall be limited to the product of the fair market rental value of the premises prior to the emergency conditions and two times the rate of inflation as determined by the increase in the CPI for the immediately preceding nine month period. For the purposes of this section, "CPI" means the annual average over a 12-month period beginning September 1 and ending August 31 of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), All Items Series A, of the United States Department of Labor (1957-1959 = 100), for the New York, NY-Northeastern New Jersey region.

c. In the event that a landlord believes that the limitations on increases in rental charges imposed by a "Notice of Rent Protection Emergency" prevent the landlord from realizing a just and reasonable rate of return on the landlord's investment, the landlord may file an application with the Director of the Division of Consumer Affairs in the Department of Law and Public Safety for the purpose of requesting permission to increase rental charges in excess of the increases otherwise authorized under the "Notice of Rent Protection Emergency". In evaluating such an application, the director shall take into consideration the purposes intended to be achieved by P.L.2002, c.133 (C.2A:18-61.62 et seq.), and the "Notice of Rent Protection Emergency" and the amount of rental charges required to provide the landlord with a just and reasonable return. The Director shall promulgate rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to effectuate the purposes of this act.

d. The provisions of subsections a. and b. of this section will serve to supplement, not replace, any existing local, State, or federal restrictions on rent increases for any dwelling units in residential buildings and small businesses operating for retail purposes located within the zone described in subsections a. and b. of this section, and will only apply to those dwelling units and commercial properties where they cause a lowering of the maximum allowable rent increase or of the maximum reasonable rent increase.

e. The provisions of subsections a. and b. of this section shall cease to apply upon the expiration of the state of emergency or public health emergency, or both, or upon the rescission of [the] either (1) the declaration of the state of emergency or public health emergency, or both, or (2) the "Notice of Rent Protection Emergency."

(cf: P.L.2002, c.133, s.2)

3. The Director of the Division of Consumer Affairs shall, pursuant to the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), adopt such rules and regulations as shall be necessary to implement the provisions of this act no later than one month following the effective date of this act.

4. This act shall take effect immediately.

STATEMENT

This bill would authorize the Governor to restrict rent increases on certain commercial tenants during emergency circumstances, and would enhance similar existing authority over rent increases on residential tenants.

Under current law, whenever a state of emergency is declared by the Governor and is in effect, the Governor may issue a "Notice of Rent Protection Emergency" (“NRPE”) to prohibit certain large rent increases on residential tenants in the area of the emergency, if it is determined that unconscionable rental practices are likely to occur. This bill would expand these powers by authorizing the Governor to issue the NRPE during a public health emergency, and apply rent increase restrictions on commercial properties rented by certain retail businesses, in addition to residential properties.

Under existing law, a residential landlord would violate an NRPE issuance if the proposed percentage increase in rent is greater than twice the rate of inflation as indicated by increases in the consumer price index for the immediately preceding nine-month period. This bill would allow the Governor to apply the same restrictions on rent increases on commercial properties rented by small retail businesses. However, under the bill, if expressly provided in the NRPE, the Governor would be able to prohibit any rent increase on residential properties, or commercial properties rented by small retail businesses, regardless of the rate of inflation. Regarding small retail businesses, these rent protections would specifically apply to those that employed fewer than 20 people immediately prior to the emergency declaration, and that function primarily to serve consumers directly in the distribution of food, beverages, goods, or services, at one or more physical locations.

Rent restrictions under the NRPE would expire either upon expiration of the state of emergency or public health emergency, or upon the rescission of the state of emergency, the public health emergency, or the NRPE itself.

A violation of the provisions of an NRPE would constitute a violation of the New Jersey consumer fraud act. The Division of Consumer Affairs would hold investigative and enforcement authority regarding NRPE declarations.

The bill provides the Director of the Division of Consumer Affairs with the authority to promulgate any necessary rules and regulations regarding any NRPE declarations.