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COVID-19: New Jersey Business Closures Impacting Commercial Real Estate Leases
Practical Law Legal Update w-024-5936 (Approx. 5 pages)
COVID-19: New Jersey Business Closures Impacting Commercial Real Estate Leases
by Practical Law Real Estate
| Published on 24 Mar 2020 • New Jersey |
In response to the COVID-19 pandemic, New Jersey's Governor has issued Executive Order 107, which implements statewide business closures, including retail closures, effective as of March 21, 2020.
In response to the 2019 novel coronavirus disease (COVID-19) pandemic, New Jersey's Governor has implemented statewide business closures, including retail closures, by Executive Order (EO) 107 issued on March 21, 2020. This order builds on Executive Order 104, which establishes statewide social mitigation strategies. The governor also issued Executive Order 108, which preempts any local restriction that changes (by increasing or relaxing) the provisions of Executive Order 107.
Effective 9 p.m. on March 21, 2020, the brick-and-mortar premises of all non-essential retail businesses and all recreational and entertainment businesses must close to the public for so long as EO 107 remains in effect.
Essential Businesses
Essential retail businesses:
- Are excluded from EO 107.
- May remain open during their normal business hours.
- Must, wherever practicable, provide pickup services outside or adjacent to their stores for goods ordered in advance online or by phone.
- Must implement social distancing practices to the extent practicable. Social distancing practices include:
- all reasonable efforts to keep customers six feet apart; and
- frequent use of sanitizing products on common surfaces.
The following are designated as essential retail businesses:
- Grocery stores, including:
- farmer’s markets and farms that sell directly to customers;
- other food stores; and
- retailers that offer a varied assortment of foods comparable to what exists at a grocery store.
- Pharmacies and alternative treatment centers that dispense medicinal marijuana.
- Medical supply stores.
- Convenience stores.
- Ancillary stores within healthcare facilities.
- Hardware and home improvement stores.
- Retail functions of:
- gas stations;
- banks and other financial institutions;
- laundromats and dry-cleaning services;
- printing and office supply shops; and
- mail and delivery stores.
- Stores that principally sell supplies for children under five years old.
- Pet stores.
- Liquor stores.
- Car dealerships, but only to provide;
- auto maintenance and repair services;
- and auto mechanics.
The State Director of Emergency Management is empowered to make additions, amendments, clarifications, exceptions, and exclusions to this list of essential retail businesses.
Restaurants and Bars
EO 107 makes separate provisions for restaurants (including cafeterias, dining establishments, and food courts) and bars (including all other holders of a liquor license with retail consumption privileges). Restaurants and bars:
- May operate their normal business hours,
- May only offer food delivery and take-out services (and for bars, if permitted by an existing liquor license).
Alcoholic beverages sales from restaurant and bars are limited to original containers sold from the principal public barroom.
Retail Businesses That Must Close
In addition to non-essential retail businesses, EO 107 also orders that the brick and mortar premises of all recreational and entertainment businesses must close to the public for so long as EO 107 remains in effect.
Recreational and entertainment businesses include:
- Casino gaming floors, including retail sports wagering lounges, and casino concert and entertainment venues. Online and mobile sports and casino gaming services may continue to be offered.
- Racetracks, including stabling facilities and retail sports wagering lounges. Mobile sports wagering services may continue to be offered.
- Gyms and fitness centers.
- Entertainment centers, including:
- movie theaters;
- performing arts centers;
- other concert venues; and
- nightclubs.
- All indoor portions of retail shopping malls. Restaurants and essential stores at shopping malls that have their own external entrances may remain open in accordance with EO 107, provided that all entrances and exits to the common area portions of retail shopping malls must remain closed.
- All places of public amusement, whether indoors or outdoors, including but not limited to:
- amusement parks, theme parks, and water parks;
- aquariums and zoos;
- arcades and fairs;
- children's play centers and funplexes;
- bowling alleys; and
- family and children’s attractions.
- Personal care services facilities, including:
- cosmetology shops, beauty salons, nail salons, and electrology facilities;
- barber shops and hair braiding shops;
- spas, including day spas and medical spas (excluding any health facilities that provide medically necessary or therapeutic services).
- massage parlors and tanning salons;
- tattoo parlors; and
- public and private social clubs, whether or not they serve alcohol (including but not limited to facilities owned or operated by the American Legion, Veterans of Foreign Wars, Knights of Columbus, and any other social clubs associated with community service organizations).
The State Director of Emergency management, is empowered to make additions, amendments, clarifications, exceptions, and exclusions to this list of recreational and entertainment businesses.
Practical Implications
The evolving COVID-19 pandemic and the mandated closures or reductions of operations for businesses and stores are creating uncertainty for commercial landlords and tenants. Parties should consult with counsel to evaluate possible risks and liabilities, under both their lease agreements and applicable state law, and should proactively negotiate to:
- Adjust the terms of the lease, either:
- for the duration of the COVID-19 pandemic; or
- permanently.
- Avoid future lease disputes.
- Mitigate damages.
To assist with future negotiations or dispute resolution, tenants should carefully document:
- The dates when governmental orders become effective against the tenant.
- All impacts of regulations and orders on the tenant's business at the premises.
- All expenses that they are incurring in responding to the COVID-19 pandemic.
- All efforts by the tenant:
- to perform under the lease; and
- to mitigate losses.
For a collection of resources related to global coronavirus, COVID-19, pandemics, and business interruption content, see Global Coronavirus Toolkit.