USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
or a letter of credit or guaranty from a well-capitalised parent entity. A letter of credit is generally considered more desirable to a landlord than a cash security deposit as such forms of security deposit may place the landlord in a better position in the event of the tenant’s bankruptcy (as a letter of credit is not part of a tenant’s bankruptcy estate). When holding cash, a landlord generally does not segregate the security deposit, and as such any cash held by the landlord would become part of a landlord’s bankruptcy estate. The amount of the security deposit is negotiated but is often based on monthly rent or a multiple thereof. 6.18 Right to Assign a Leasehold Interest Assignment and subletting are extremely sensitive issues that are commonly negotiated in the written lease. Where a lease is silent, the tenant does have a right to assign its leasehold interest in the lease and/or sublet all or a portion of the premises; however, land - lords and tenants usually draft language into the lease to ensure that there is no misunderstanding as to the terms and potential limitations. Often, landlords will reserve the right to terminate the lease and recapture the premises in the event that all or substantially all of the premises is subleased for all or substantially all of the remainder of the term or the tenant’s attempts to assign the lease. 6.19 Right to Terminate a Lease In this jurisdiction, both landlord and tenant typically have a right to terminate in the event of a condemna - tion by a governmental authority and/or a casualty event that either exceeds a dollar amount or requires a stated period for remediation. In addition, landlords reserve the right to terminate a tenant’s lease if that tenant defaults on its lease obligations and fails to cure following notice from the landlord. In a retail lease, tenants often seek the right to terminate the lease if they fail to hit certain revenue milestones; such rights are often referred to as a “kick out” and may be conditioned on a reimbursement of any unamortised landlord leasing costs such as its build-out expenses and brokerage commissions paid, as well as free rent previously provided. Recently, early termination clauses have become more prevalent in non-retail leases as well, whereby tenants can terminate a lease prior to expiry by giv -
ing notice to the landlord together with payment of a termination fee of a fixed amount, plus reimbursement of any unamortised landlord leasing costs such as its build-out expenses and brokerage commissions paid,
as well as free rent previously provided. 6.20 Registration Requirements
Leases in New Jersey are not required to be regis - tered. A memorandum of lease may be recorded in the land records of the county in which the leased premises are located upon payment of nominal filing fees and costs, provided that generally a memoran - dum of lease would only be recorded in the event of a ground lease. The Flood Hazard Disclosure Law, which applies to leases in New Jersey after 20 March 2024, requires landlords to make detailed flood risk disclosures when renting property to tenants. See 2.3 Effecting Lawful and Proper Transfer of Title . 6.21 Forced Eviction In New Jersey, a landlord may terminate a lease and force the tenant to vacate its premises in the event of a default under the lease, such as failure to pay rent. Self-help is generally not permitted, and, even if permitted, a landlord typically should not pursue such remedies due to the potential liability arising there - from. An eviction is properly pursued in court – usually in a landlord-tenant part of the court. The timing of the process varies, but in a non-payment of rent case the process should be expected to take no less than three months from notice to judgment. After judgment of eviction is obtained, a sheriff is required to enforce the judgment and evict the tenant. The sheriff’s eviction may be complicated by the ten - ant’s inventory or machinery located at the premises. In such cases, the landlord may need to arrange for a contractor to remove the tenant’s property under guid - ance of the sheriff, and typically may add the costs of such contractors to the tenant’s indebtedness. 6.22 Termination by a Third Party A lease may be terminated by condemnation; a pro - cess which is described in 6.19 Right to Terminate a Lease . In the event of a condemnation, the award is given to the property owner, though tenants are
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