Typically at this time of year, Mary Arabia-Galgon is driving down Route 55 to open up her Wildwood duplex, and collecting final payments from the families who rent the spaces for the summer.
But this year, due to the coronavirus, Arabia-Galgon remains in her Bensalem, Pennsylvania, home, watching the calendar days inch closer to May and anxiously anticipating a cancellation from her renters.
“I’m just holding my breath,” said Arabia-Galgon, 54.
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Nearly all homeowners, renters, real estate brokers and officials of Jersey Shore communities have said something like that with a sigh, as shutdowns and beach closings edge into the summer with no clear end in sight, threatening the state’s multibillion-dollar tourism industry.
In Cape May County, which has about 50% of the state’s second homes, seasonal renters are worrying about refunds, homeowners and brokers are reviewing contract language and officials are wondering if the entire local economy could be upended.
The financial implications of keeping the beach communities closed are hefty, but local officials want to prevent a coronavirus case surge caused by an influx of visitors and second-home owners. But for all involved, this is uncharted territory. Rental contracts don’t mention pandemics and tenants don’t want to cancel, but they also don’t want to make payments amid the uncertainty.
It has come down to a waiting game.
“I have dealt with snowstorms and hurricanes and the H1N1 virus,” said Gerald M. Thornton, director of Cape May County’s freeholder board. “This is without a doubt the most difficult situation I have ever dealt with in my time in office.” He has served on the board since 1995 and was on it for 11 years in the 1970s and ‘80s.
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Arabia-Galgon’s tenants, who have rented her duplex for eight years, have told her they still plan to rent the space, “but there’s always that underlying ‘but,’” she said.
If they back out, she said, she will lose $14,000. On top of that, her husband, Timothy, was laid off because of the pandemic after working as an HVAC service manager for 30 years.
“I have no backup plan. We live paycheck to paycheck,” said Arabia-Galgon, who works as a property manager in Philadelphia. “I rely on that $14,000 to get me through the whole year with the bills.”
When Gov. Phil Murphy signed a stay-at-home order March 21, second-home owners flocked to shore communities to wait out the virus in the sand and sun. But since then, nearly all the main beaches and boardwalks have closed, and most coastal communities have banned short-term rentals.
Cape May County, where second home and rental income brings in about $2.1 billion each year, has an indefinite ban on short-term rentals.
“We don’t want a lot of visitors here right now,” Thornton said.
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The county has about 95,000 full-time residents, but during the summer, that population balloons to more than 750,000. Tourism generates $6.3 billion each year and provides 43.5% of the county’s jobs, according to county data from 2017.
But if the shutdown goes into prime rental months like June or July, as Murphy predicted Tuesday, the county’s entire economy could be at risk.
“It’s very difficult for everybody — the homeowners, the hotels, the businesses. It’s a nightmare for us,” said Thornton. “But we have to make sure the public health issue is addressed first.”
Ann Delaney, a real estate broker for Tim Kerr Sotheby’s International Realty in Avalon, started reaching out to property owners to talk them through potential cancellations and review contract language. Then she began connecting with tenants.
Delaney said most of the owners of the 40 rental properties she manages were understanding of the circumstances, and some were quick to agree to full refunds. Others, she said, wanted to understand the legal terms of their contracts and whether refunds would be required.
“Our lease doesn’t deal with a pandemic,” said Delaney. “No lease does.”
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She said her office is considering the pandemic to be an “act of nature,” like a hurricane, which typically results in full refunds if the town is closed down during the reservation. But hurricanes usually come late into rental season, when the busiest weeks have passed.
“There is so much up in the air,” she said. “It is really going to have to be on a case-by-case basis.”
Only two tenants of her properties have opted to cancel so far, she said, both traveling from outside the region with early June rental dates. Both were given full refunds. The rest are playing the waiting game, trying to salvage their summertime tradition.
As reservations are canceled and refunds processed, Delaney must also return her commissions.
“I’m working really hard to organize the (refunds), and I’m not only not making money, but losing money,” she said. “But it’s the right thing to do, and it’s for long-term business.”
Monihan Realty in Ocean City, in a letter to tenants, said failure to continue making payments could be a breach of contract, “which could lead to forfeiture of your deposit(s) and open you to potential legal action for nonpayment regardless of the circumstances.” The company said the deposits made after April 1 would be held in a “trust” in case the reservations are canceled due to the virus.
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Ann Cullen, of Paramus, has paid half of the deposit for the Long Beach Island house her family of five rents each year. They have reserved the house for June 27 through July 11, and the final payments are due next month.
“I am kind of just waiting it out at this point,” said Cullen, whose husband tested positive for the coronavirus in mid-March and recovered.
Cullen said if New Jersey’s cases remain high, she wouldn’t want to stay in someone else’s home.
“But if we are out of the woods at that point, I would be totally comfortable with taking my family down there,” said Cullen. “But it will all be based on what the governor decides for the state.”