Ended a MtM lease in a house hack with bad tenants

[Ben Muska]

Hi everyone!

My wife and I just bought a duplex in South Jersey to house hack. The current tenants in the other unit are on a month to month lease. There are a few problems:

1. The rent is too low ($1350 for a 3 bed/2 bath, plus 5 pets with no pet fees)

2. The tenants aren't paying rent

I provided a notice that either the lease would not be renewed, or the rent would increase to market value (after renovations that are meant to be done when they leave) of $1650 plus $50 a pet. They did not respond in the given timeframe. According to the lease and in observance of NJ law, I provided a 45 day notice of non-renewal. After a few days, I have heard from the tenants telling me to start the eviction process and to go ahead with the increased rent.

This is my first property and I'm not entirely sure what to do here. According to NJ law, a landlord can choose to not renew a lease for any reason if it is a small, owner-occupied property. I'm going to talk with a lawyer, but I'd like to know if anyone has gone through this. They threatened to bring in a lawyer. Do they have any legal grounds? Am I able to evict in this situation while Covid is still a thing? I'm having difficulty finding laws pertaining to this circumstance.

Thanks in advance!