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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

United States

New Jersey

SECURITY INSTRUMENT USED

(See N.J.S.A. 2A:50-53 et seq.): A.B. S3411 introduced changes to the New Jersey Fair Foreclosure Act whereas a mortgage lender must provide a homeowner with a notice of intent to foreclose at least 30 days in advance, and it must also be provided no later than 180 days before filing the foreclosure complaint. (N.J.S.A. 2A:50-56(a), as amended by P.L.2019, c.69, &sect; 1). This notice must also include a representation that they are licensed under the Residential Mortgage Lending Act or exempt from licensure. (See A.B. S3416).

NOTICE REQUIREMENTS

(See N.J.S.A. 46:26A et seq.): The first page must contain the name and address of mortgagor and mortgagee and the lot and block numbers of the property. The document must be signed by mortgagor(s) (many counties require black ink), with the signatories' names printed, typed, or stamped beneath the signatures. The signatures must be acknowledged or proved. A notary public, any licensed New Jersey, attorney and any County Clerk or deputy County Clerk are among those authorized to take acknowledgments. The document must be in the English language or accompanied by an English translation. All required per-page recording fees must be paid. N.J.S.A. 46:26A-11 permits the filing of a notice of settlement (in the form provided) that protects the priority of the document during the “gap” period. The filing is effective for 60 days from the date of the recording.

RECORDING REQUIREMENTS

N.J.S.A. 46:10B-51 requires creditors: <ul>
 <li>Within 10 days after serving a summons and foreclosure complaint regarding NJ residential property, to file with the clerk and the mayor or other chief executive officer of the municipality in which the property is located the full name, address, and telephone number of (1) the creditor's representative, and, if the creditor is out-of-State, its in-State representative or agent, who is responsible for receiving complaints of property maintenance and code violations in the event the property is or becomes vacant or abandoned, (2) anyone the creditor retains to maintain the property, and (3) if the creditor is out of-State, an in-State individual authorized to accept service of process on its behalf.</li>
 <li>Within 10 days of a change in any of the above information, to update the municipal clerk regarding the change.</li>
 <li>To file the same information as set forth above, plus the name, address and telephone number of any servicer responsible for receiving complaints of property maintenance and code violations, with the foreclosure summons and complaint in Superior Court and the lis pendens filed with the county clerk or registrar of deeds, and to update both regarding any change in that information within 10 days. (See B. A4999).</li>
</ul> &nbsp;

FILING REQUIREMENTS

None. (N.J.S.A. 2A:50-2.2 explicitly states that if a borrower enters into an express agreement at the time of, or in connection with, the making or renewal of a loan secured by a mortgage that waives any rights or privileges afforded under N.J.S.A. 2A:50 et seq. (Foreclosure Actions), such waiver is of no effect and such agreement shall be considered void.) There are, however, several special statutory provisions worthy of note: <ul>
 <li>J.S.A. 46:9-3 provides for (but does not require) a covenant that a mortgagor will not be entitled to a credit against the mortgage principal or interest due for a payment of any tax on the mortgaged premises.</li>
 <li>There are no rights of dower or curtesy for estates created after May 28, 1980 (N.J.S.A. 3B:28-2), but the right of joint possession in a principal marital residence may be waived, relinquished, etc., only by the signatures of both spouses. N.J.S.A. 3B:28-3 and N.J.S.A.&nbsp;3B:28-3.1, however, provide that the right of possession is subject to a mortgage provided the:</li>
</ul> <ul>
 <ul>
 <li>mortgage predates the acquisition of title by the married person; or</li>
 <li>mortgage is placed on the residence prior to marriage; or</li>
 <li>the mortgage is a purchase money mortgage, or;</li>
 <li>the parties to the marriage have joined in the mortgage; or</li>
 <li>the right of possession has been (1)&nbsp;subordinated, released or extinguished by premarital agreement, separation agreement or other written instrument (N.J.S.A. 3B:28-3(b)) or (2)&nbsp;extinguished by consent, judgment of divorce, separation or annulment, other order or judgment or voluntary abandonment of the principal matrimonial residence (N.J.S.A. 3B:28-3(c)).</li>
 <li>A spouse may not unilaterally encumber property held by spouses as tenants by the entirety; both spouses' consent is required. N.J.S.A. 46:3-17.4.</li>
 </ul>
</ul>

STATUTES TO BE WAIVED

When a mortgage is secured by 1 to 6 dwelling units (a portion of which may be used for non-residential purposes) and interest is charged in excess of 6%, full prepayment is permitted without penalty. N.J.S.A. 46:10B-2. Partial prepayments in multiples of $50 are permitted, but such partial payments shall not exceed one-third of the face amount within a 6-month period (on a non-cumulative basis. (N.J.S.A. 46:10B-3). Failure to accept such payments results in a forfeiture of interest earned on such payments. N.J.S.A. 46:10B-7. Federal law may preempt such regulations. 12 U.S.C.A. 3801/12 C.F.R. 560.220; see Glukowsky v. Equity One, Inc., 180 N.J. 49 (2004).

UNUSUAL TREATMENT OF STANDARD PROVISIONS

Future advances retain priority as of the date and time of the recording of the mortgage only to the extent of the amount specified in the mortgage, plus accrued interest, payments for taxes and insurance, and other payments made by the mortgagee pursuant to the terms of the mortgage. N.J.S.A. 46:9-8.2.

SECURING FUTURE ADVANCES

To ensure priority, obtain construction lien waivers and title endorsements for disbursements. Construction lien waivers are against public policy and unenforceable unless given in exchange for payment and are only enforceable to the extent that such payment is actually received. N.J.S.A. 2A:44A-38.

CONSTRUCTION LIENS

Lines of credit secured by a mortgage are secured up to the maximum amount specified. Priority for advances relates back to the date and time of recording of the mortgage to the extent that such advances do not cause the principal balance to exceed the maximum amount specified. N.J.S.A. 46:9-8.1 and N.J.S.A. 46:9-8.2.

LINES OF CREDIT

Priority for protective advances relates back to the date and time of recording of the mortgage to the extent that funds are advanced for taxes insurance and other items provided for under the terms of the mortgage. N.J.S.A. 46:9-8.2.

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL, INCLUDING PAYMENT OF TAXES AND INSURANCE

TRUSTEE UNDER DEED OF TRUST: N/A.

TRUSTEE UNDER DEED OF TRUST N/A.

After a mortgage default occurs and all delinquency requirements have been met (including the giving of notice and expiration of grace periods, if applicable), a complaint must be filed in Superior Court, venued in the county where the mortgaged property is located, and a Lis Pendens must also be filed. N.J.S.A. 2A:15-6. The Lis Pendens is effective for 5 years from date of filing. N.J.S.A. 2A:15-11. A Summons and Complaint must thereafter be served on the mortgagor(s) and any parties who have an interest in the property. Upon the issuance of a judgment of foreclosure and writ of execution, the writ is transmitted to the sheriff of the county where the real property is situated and after publishing an advertisement, a public sale is conducted. The successful bidder receives a sheriff's deed. The sheriff receives a commission that is based on the sale price of the property. A.B. S3464 amended provisions in the Fair Foreclosure Act requiring a sheriff sale of a foreclosed property to be conducted within 150 days of the sheriff's receipt of the writ of execution from the court (see N.J.S.A. 2A:50-64(a)(3)(a) as amended by P.L.2019, c.71, &sect; 1). If the sheriff cannot complete the transaction within a timely basis, debtors can to apply to the Office of Foreclosure for an order to appoint a Special Master to hold foreclosure by allowing a Special Master to be appointed to sell multiple properties within the same vicinage. (N.J.S.A. 2A:50-64(a)(3)(c) as amended by P.L.2019, c.71, &sect; 1; and A.B. S3464). Pursuant to the A.B. S3464 amendment N.J.S.A. 2A:17-36, a “sheriff or other officer” selling foreclosed real estate may make from two to five (two if requested by the lender, two if requested by the debtor, and one if both parties request it) adjournments, and increases the maximum length of any adjournment to 30 days. (N.J. S.A. 2A:17-36 as amended by P.L.2019, c.71, &sect; 2). In residential foreclosures, notice of foreclosure mediation must be provided on 3 separate occasions: (1)&nbsp;Notice is attached to Summons and Complaint when served upon the defendant homeowner; (2)&nbsp;Notice is served by the Administrative Office of the Courts within 60 days after service of the complaint; and (3)&nbsp;Notice must be attached to the Notice of Motion for Final Judgment. N.J. Court Rule 4:4-4 and N.J. Court Rule 4:64-1 et seq. A Plaintiff's attorney must also submit affidavits pursuant to N.J. Court Rule. 4:64-1(a)(2) and (3), N.J. Court Rule 4:64-2(d) and N.J. Court Rule 1:4-8(a), certifying that diligent inquiry has been made by the plaintiff with respect to factual assertions made within the complaint. Typical Length of Procedure: 8 to 24 months (assuming no bankruptcy), depending on the county (court docket, sale backlog, postponements allowed, etc.) and whether or not the action is contested. Expedited Foreclosure: For properties that are determined by a court to be “vacant and abandoned”, the Fair Foreclosure Act as amended by A.B. S341: <ul>
 <li>Gives sheriffs more time to sell such properties, i.e., 90 days rather than 60 days after receiving the writ of execution.</li>
 <li>Requires plaintiffs to apply to the court for an order appointing a Special Master or another judicial officer to hold the sale within 90 days of the application in cases where the sheriff cannot effect a timely sale.</li>
 <li>Allows plaintiffs to convert a regular foreclosure action into a summary action whenever they have reason to believe the property has become vacant and abandoned and they file a certification to that effect with the court detailing the basis for their belief. (N.J.S.A. 2A:50-73(c), (j) as amended by P.L.2019, c.72, &sect; 2).</li>
</ul> &nbsp; Foreclosure Bid Requirements: The minimum allowed bid is $100, and credit bids are permitted by the foreclosing lienholder up to the amount due on the foreclosure judgment plus interest, costs and the sheriff's fee. Non-foreclosure judgment holders may bid but they must put up a deposit (10-20%, varying by county) in cash or a certified check. The balance of the bid price must be remitted within a specified period of time or the bidder may forfeit its deposit and be responsible for the difference in the amount received from a subsequent sale. In most counties, bids can be assigned by a successful bidder prior to the sheriff's preparation of the deed. This saves one level of transfer fees because the sheriff deeds the property directly to the assignee.

BRIEF DESCRIPTION OF PROCEDURE (assuming no bankruptcy)

10-day period following a foreclosure sale, subject to the Internal Revenue Service's 120-day right of redemption with respect to its liens (26 U.S.C. 7425 (d)). In the event that a bankruptcy filing occurs within the 10-day period, the redemption period is extended for 60 days, 11 U.S.C. 108(b). If, after the foreclosure and sale of the mortgaged property, a judgment is entered for any balance of the debt, the person against whom the judgment is entered may redeem the property by paying the full amount of the judgment, interest and costs and all reasonable expenses the purchaser of the property may have incurred within 6 months of the entry of judgement for the balance of the debt. N.J.S.A. 2A:50-4. The redemption price is the full amount of the mortgage indebtedness plus the costs of the foreclosure action, fees and costs of sale, and interest from the date of the judgment. N.J.S.A. 2A:50-4.

REDEMPTION PERIOD AND PRICE

The redemption period is not subject to reduction. The right of redemption may be transferred, sold or assigned for fair and reasonable consideration. N.J.S.A. 2A:50-4, see Lobsenz v. Micucci Holdings, Inc., 127 NJ. Super. 50 (AD 1974). Case law prohibits practices that “clog the equity of redemption,” such as taking an option on the mortgaged premises in the mortgagor's favor at the time of a mortgage execution.

WAIVER OF REDEMPTION; REDUCTION OF REDEMPTION PERIOD

N.J.S.A. 2A:50-2 provides that in the residential context a deficiency action can only be made on a note or bond following a foreclosure of the mortgage when foreclosure does not satisfy the obligations evidenced by the note or bond, and only against a person who was made a party to the foreclosure action. Notice of intent to file a deficiency action must be filed with the County Clerk or Register. Creditors may, simultaneously with the prosecution of a foreclosure action, commence and prosecute an action on the note when the underlying debt is secured for a business or commercial purpose. See N.J.S.A. 2A:50-2.3. and Summit Trust Co. v. Willow Business Park, L.P., 269 N.J. Super. 439 (App. Div. 1994).

DEFICIENCIES

Unless named in the foreclosure action, subordinate leases remain in effect and a successful bidder takes subject to all existing leases. Subordination, nondisturbance and attornment agreements are recognized and generally enforceable. In the residential lease context, the law prevents extinguishment by a lender even if it is subordinate to mortgages. Eviction is permitted only for cause under the New Jersey anti-eviction statute.

EFFECT OF FORECLOSURE UPON LEASES

In a series of cases, the New Jersey Supreme Court has outlined the procedures that must be followed in any sale of real property where the real property is the subject of a tax foreclosure. Contact local counsel if this appears in a transaction.

TAX FORECLOSURES

The New Jersey Foreclosure Mediation Act (see A.B. A664) requires lenders to provide homeowners facing foreclosure with information about the 2008 Foreclosure Mediation Program, both with lender's initial notice of intention to foreclose and the summons and complaint. This Act also expands the availability of foreclosure mediation by allowing for mediation in cases involving an “owner-occupied one to four-dwelling unit residence, one of which is occupied, or is planned to be occupied, by the homeowner-borrower, or a member of the homeowner-borrower's immediate family.” (See N.J.S.A 2A:50-75(b)). Finally, the Act creates a funding mechanism for the program by requiring plaintiffs to pay a $155 fee to the Judiciary when filing a foreclosure complaint and authorizes the court to sanction a party or attorney for failing to attend a foreclosure mediation session by ordering the offending party to pay a civil penalty of up to $1,000 or the other party's reasonable attorney's fees or litigation expenses, or both. (A-664, Legislative Fiscal Estimate (Second Reprint)).

FORECLOSURE MEDIATION

Pursuant to the amendment of the New Jersey Fair Foreclosure Act under A.B. S3411: <ul>
 <li>A residential mortgage foreclosure action that has been dismissed without prejudice is allowed to be reinstated only upon a motion for good cause shown.</li>
 <li>The number of reinstatements that may be initiated is set at three.</li>
 <li>The fee for reinstatements is set at twice the fee for filing the foreclosure complaint. (SeeJ.S.A. 2A:50-56.3 (added by P.L.2019, c.69, &sect; 2)).</li>
</ul>

REINSTATEMENT OF FORECLOSURE ACTIONS DISMISSED WITHOUT PREJUDICE

Criminal: 30% per annum interest as to individuals and general partnerships and 50% per annum as to corporations, LLPs and LLCs. N.J.S.A. 2C:21-19. Civil: 6% per annum interest on unwritten debt obligations and 16% per annum interest on written debt obligations. N.J.S.A. 31:1-1(a).

USURY CEILING

Criminal: None. Civil: Loans exceeding $50,000 are not subject to civil usury limits unless secured by a first lien on real property containing 1 to 6 dwelling units. N.J.S.A. 31:1-1(e). Corporations, LLPs and LLCs are barred from asserting usury as a defense. N.J.S.A. 31:1-6. The usury ceiling does not apply to public entities N.J.S.A. 31:1-7.

USURY EXEMPTIONS

Personalty: Central filing of UCC-1 Financing Statements with the State Treasurer (Division of Commercial Recording), Department of Treasury, Trenton, New Jersey. All UCC Financing Statements filed with the State Treasurer must be filed electronically. Fixtures: UCC-1 Financing Statements may be filed with the County Clerk or County Register, as applicable in the county where the fixtures are located.

LOCATIONS FOR FILING

A recorded mortgage can be effective as a financing statement for a fixture filing if it describes the fixtures. Note: All UCC Financing Statements must contain the following language in Section 4 where the collateral is described: “The collateral covered by this financing statement is within the scope of Article 9 of the New Jersey Uniform Commercial Code, pursuant to N.J.S.A. 12A:9-102 and 12 A:9- 109.”

SECURITY INSTRUMENT AS FIXTURE FILING

UNUSUAL PROVISIONS OR REQUIREMENTS

None, but notice, presentment and dishonor may be waived.

None. Check to see if guaranty of collection or of payment.

SPECIAL PROBLEMS IN ENFORCEMENT OF GUARANTY

In the case of a residential mortgage loan, N.J.S.A. 2A:50-2 provides that deficiency action on a note or bond can be instituted only following a foreclosure of the mortgage when foreclosure does not satisfy the obligations evidenced by the note or bond, and only against a person who was made a party to the foreclosure action. In the case of a commercial mortgage loan, the mortgagee may proceed directly against a guarantor without first foreclosing on the mortgaged property or seeking to recover against any other obligor or collateral. See N.J.S.A. 2A:50-2.3. and Summit Trust Co. v. Willow Business Park, L.P., 269 N.J. Super. 439 (App. Div. 1994).

ISSUES AND GUIDELINES RELATED TO SEEKING/OBTAINING DEFICIENCY JUDGMENTS

GENERAL

<ul>
 <li>The 6-year statute of limitations on contract debts applies to the foreclosure of commercial mortgages. For the foreclosure of a residential mortgage, the statute of limitations is the earliest of (i) 6 years from the maturity date of the mortgage loan, (ii) 36 years from the date of the recording of the mortgage and (iii) 6 years from the most recent missed regular payment, unless the default date was extended in writing or later payments were made. N.J.S.A. 2A:50-56.1.</li>
 <li>For a deficiency action on a commercial mortgage loan, the statute of limitations is 1 year from a foreclosure sale. N.J.S.A. 2A:50-8. For a deficiency action on a residential mortgage loan, the statute of limitations is 3 months from a foreclosure sale. N.J.S.A. 2A:50-2.</li>
</ul>

STATUTE OF LIMITATION PERIOD

<ul>
 <li>An original recorded mortgage endorsed for cancellation by mortgagee or assignee of record and presented to a recording officer, or</li>
 <li>An instrument in recordable form satisfying, discharging or canceling the mortgage presented to a recording officer.</li>
 <li>Partial releases of the mortgaged premises in recordable form may be presented to a recording officer.</li>
 <li>The mortgagee must inform the mortgagor within 10 days of the payoff of the mortgagor's right to demand the mortgagee to discharge or cancel the mortgage of record. The mortgagee must do so within 30 days of receipt of the demand and the fee for recording. N.J.S.A. 46:18-11.2(a). Fees cannot exceed $25 over recording costs. N.J.S.A. 46:18-11.2(b)(2).</li>
</ul>

REQUIREMENTS FOR RELEASE OF LIEN

HOMESTEAD ISSUES

COMMUNITY PROPERTY

MORTGAGE TAX

DOCUMENTARY STAMP TAX

Realty Transfer Fee Payable by Seller: Fee on the purchase consideration (including any mortgage loan assumed) imposed on the seller of real property.<a href="#_ftn18" name="_ftnref18">[18]</a> There are various exemptions.<a href="#_ftn19" name="_ftnref19">[19]</a> See N.J.S.A. 46:15-10. An Affidavit of Consideration for Use by the Seller must be completed and recorded with the deed when the seller claims a total or partial exemption from the fee, the sale involves Class 4 property (commercial, industrial or apartment property) and for transfers of “new construction” property. See N.J.S.A. 46:15-5 et seq. Realty Transfer Fee Payable by Buyer (“Mansion Tax”): Fee of 1% of the purchase consideration imposed on the buyer of certain real property (residential (Class 2 property) or commercial (Class 4A property)) where the consideration is in excess of $1,000,000. N.J.S.A. 46:15-7.2. There are various exemptions. An Affidavit of Consideration for Use by the Buyer must be completed and recorded with the deed when the purchase consideration is in excess of $1,000,000. See N.J.S.A. 46:15-5 et seq. Certain non-deed transfers of a controlling interest in an entity that owns certain commercial property (Class 4A property) is subject to a 1% tax when the purchase consideration is in excess of $1,000,000. See N.J.S.A. 54:15C-1. Note: The buyer of New Jersey property, where the seller is a non-resident, must withhold an estimated gross income tax of not less than 2% of the purchase consideration. See N.J.S.A. 54A:8-9.

TRANSFER TAX

Choice of law provisions in security agreements are generally enforceable so long as the transaction bears a reasonable relationship to the state whose laws were chosen.

ENFORCEABILITY OF AGREEMENT OF BORROWER AND LENDER AS TO CHOICE OF LAW PROVISIONS

On a motion by the lender, a court can appoint a receiver in an exercise of its equitable powers. The court is more likely to grant the motion upon a showing that (a)&nbsp;the mortgage document contains a specific assignment of any leases and the mortgagee's right to collect rents and (b)&nbsp;the property's value is less than the amount due to the mortgagee and the appointment of a receiver is necessary to prevent further waste and diminution of the collateral. Moreover, if the property which is the subject of the mortgage has more than one dwelling unit but less than five, one of which is occupied by the debtor or a member of the debtor's immediate family as his/her residence at the time the loan is originated, lenders are required, pursuant to A.B. S3411: (1) file an order to show cause for the appointment of a receiver so long as the property is eligible for receivership under New Jersey's Multifamily Housing Preservation Receivership Act; and (2) to include in any notice of intent to foreclose information about this obligation and about the homeowner's right to free housing counseling under the Foreclosure Mediation Program. (N.J.S.A. 2A:50-56(c), as amended by P.L.2019, c.69, &sect; 1 (adding new pp 13 and 14) and N.J.S.A. 2A:50-56(h) (added by P.L.2019, c.69, &sect; 1)).

RECEIVER AVAILABLE

A lender may not require the borrower to employ its counsel as its own and must disclose to the borrower the advisability of employing their own counsel; a good faith estimate and basis for the lender's attorney charges must be made within 10 days of the issuance of the commitment and prior to commitment acceptance (this notice may be in the commitment). On residential mortgages (1-4-family homes), a lender may only charge attorneys' fees that relate to review work performed by the lender's attorney associated with the review of the loan documents prepared by or submitted by or at the direction of the borrower's attorney or such other work or service as requested by the borrower or the borrower's attorney. No lender charges are permitted at closing, except those set forth in the loan commitment or those with respect to which notice was provided to the borrower not less than 12 days in advance of closing. N.J.S.A.46:10A1. The borrower can be required to pay reasonable review fees of the lender's counsel.

ANY PROHIBITION OR SPECIAL RULES REGARDING LOAN APPLICATION, LOAN FEES OR COMMITMENT FEES

Limitations on Transactions of Business by Foreign Banks. Except as otherwise provided, no bank organized under the laws of a jurisdiction other than the State of New Jersey may transact any business in NJ. A foreign bank may transact trust business if it has secured from the commissioner of banking a certificate of authority to transact trust business. No foreign bank shall maintain an office in NJ, except a foreign bank may maintain one or more service facilities in NJ, provided that the foreign bank performs only back office operations at the service facility and does not transact business with its customers or the public at the service facility. Prior to opening a service facility in NJ, a foreign bank shall register the service facility with the commissioner of banking. N.J.S.A. 17:9A-316. Limitations on Transactions on Nonbank Mortgage Servicers. The Mortgage Servicers Licensing Act (see A.B. A4997) requires nonbank mortgage servicers that do not already hold a New Jersey residential mortgage lender license to obtain a mortgage servicer license. However, certain sections of the Act are applicable to all mortgage servicers and expand the department's enforcement jurisdiction, authorizing it to pursue enforcement actions against licensees and exempt entities that commit servicing violations and, in connection therewith, to impose heavy penalties. See N.J.S.A. 17:16F-27, - 46.

LENDER QUALIFICATION AND/OR LICENSURE

17:9A-331 - EXEMPT TRANSACTIONS BY FOREIGN BANKS Exempt Transactions by Foreign Banks: A foreign bank may contract in NJ with a banking institution for the acquisition of a part interest in or the entire interest in a loan such banking institution proposes to make or to acquire, or the acquisition of a part interest in or the entire interest in any loan made by such banking institution or enforcing in NJ obligations heretofore or hereafter acquired by it in the transaction of business outside of this State or in the transaction of business authorized. A foreign bank may acquire, hold, lease, mortgage or contract with respect to, or otherwise protect or convey property in NJ that is assigned, transferred, mortgaged, or conveyed to it as security for, or in whole or part satisfaction of a loan or loans made by it or obligations acquired by it in the transaction of business outside of NJ or in the transaction of any other business authorized N.J.S.A. 17:9A-331.

179A-331 - EXEMPT TRANSACTIONS BY FOREIGN BANKS

UNUSUAL MODIFICATION PROVISIONS

The Industrial Site Recovery Act (f/k/a Environmental Cleanup Responsibility Act, N.J.S.A. 13:1K-6 et seq.) (“ISRA”) imposes preconditions on the closure or transfer of an “industrial establishment” as defined under ISRA. To be an “industrial establishment”, a business must have a NAICS number identified in Appendix C of the ISRA rules, have operated on or after December 31, 1983 and use or store “hazardous substances” as defined under ISRA. Owners and operators must comply with ISRA upon the occurrence of a “triggering event”, including the sale of the property on which an industrial establishment operates or the cessation of the industrial establishment's business operations. See http://www.nj.gov/dep/srp/isra/isra_applicability.htm and N.J.A.C. 7:26B. If no waiver, exemption or alternate compliance process is available, the owner or operator of an industrial establishment must notify the New Jersey Department of Environmental Protection (“NJDEP”) by filing a General Information Notice no more than 5 days after the closure of operations (or the public announcement of its decision to close) or the execution of an agreement to transfer ownership. After notification, the owner or operator must conduct a remediation in accordance with the Technical Requirements for Site Remediation. N.J.A.C. 7:26E. Such remediation must be conducted by a Licensed Site Remediation Professional (“LSRP”) and include a Preliminary Assessment to identify potential Areas of Concern and, if necessary, a Site Investigation (“SI”) to determine if any contaminants are present above any applicable remediation standards. If there is contamination documented in the SI Report, the owner or operator must conduct a Remedial Investigation to determine the nature and extent of contamination and propose a Remedial Action Workplan (“RAW”) detailing the measures necessary to remediate the contaminated property to the applicable remediation standard. See http://www.nj.gov/dep/srp/isra/isra_applicability.htm and N.J.A.C. 7:26B. In the case of a proposed transfer of ownership, the owner or operator of an industrial establishment must obtain a Response Action Outcome (“RAO”) from an LSRP evidencing the remediation or an LSRP must certify a RAW prior to the actual transfer. When closing operations, the owner or operator must submit an RAO or an LSRP-certified RAW subsequent to closing. The owner or operator must file the ISRA application forms and/or reports in accordance with the Technical Requirements For Site Remediation. N.J.A.C. 7:26E (General Information Notice, Preliminary Assessment Report forms etc.). See http://www.nj.gov/dep/srp/isra/isra_applicability.htm and N.J.A.C. 7:26B. Failure to comply with ISRA may result in civil penalties of up to $50,000 per day. N.J.A.C. 7:26B-1.11. Failure to comply with ISRA is also grounds for voiding the sale of an industrial establishment and/or the sale of the real property on which an industrial establishment operates. The buyer of such property may bring an action to void the sale and recover damages, if the buyer provides the seller with notice and a reasonable opportunity to comply with ISRA. N.J.S.A. 13:1K-13. The Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. (the “Spill Act”), established a fund to pay for the costs of the clean-up and removal of a discharge of a hazardous substance. The fund's administrator is entitled to file with the Clerk of the Superior Court a notice of lien identifying the property and the amount of the clean-up, removal and related costs. Upon the entry by the Clerk of the Superior Court, the lien attaches to the revenues and all real and personal property of the owner/operator of the property and/or the discharger of the hazardous substance. The lien has priority over all other claims or liens that are or have been filed against the property except valid liens against 6 or fewer residential dwelling units. See N.J.S.A. 58:10-23.11f. The notice of lien filed under the Spill Act that affects any property of a discharger other than the property subject to the clean-up and removal has priority from the day filed over all claims and liens filed against the property but does not affect any valid lien filed prior to the lien notice under the Spill Act. See N.J.S.A. 58:10-23.11f.

ENVIRONMENTAL LIEN LAW ISSUES

No state or local bar opinion reports in NJ.

LEGAL OPINIONS

LABOR AND MATERIALMAN'S LIEN CLAIMS (“L&M LIEN”)

Lien Procedures: A L&M Lien is effective when it is filed with the County Clerk in the county in which the land is situated in the form set forth in N.J.S.A. 2A: 44A-8, as amended. Such filing must occur no later than 90 days (or 120 days, in the case of residential property) following the last date of furnishing the work, services, material or equipment for which payment is claimed. N.J.S.A. 2A:44A-6. Amendments to filed L&M Liens may be filed. N.J.S.A. 2A:44A-11. Copies of the L&M Lien form must be served on the property owner and the contractor and/or subcontractor against whom the lien is asserted by personal service as set forth in the N.J. Rules of Court or by simultaneous registered or certified mail within 10 days after the L&M Lien is lodged for recording. Failure to properly serve may result in unenforceability of the claim provided that the owner not properly served can prove material prejudice. N.J.S.A. 2A:44A-7. The L&M Lien cannot exceed the unpaid portion of the contract price. N.J.S.A 2A:44A-9. Note that for residential construction contracts (i.e., those involving 1- and 2-family residences, units in residential condominiums, or residential cooperative units), a Notice of Unpaid Balance and Right to File Lien must be filed within 60 days following the last date that work, services, material or equipment were provided for which payment is claimed. N.J.S.A. 2A:44A-21.

INCEPTION OF LIEN

A L&M Lien is subordinate to all bona fide mortgages, judgments and deeds recorded prior to the filing of a claim of an L&M Lien, and the L&M Lien is subject to the effect of a filed Notice of Settlement. N.J.S.A. 2A:44A-10. Even if the L&M Lien is filed prior to a mortgage it may be ineffective if the form and procedure set forth in the statute are not strictly complied with. N.J.S.A. 2A:44A-15. Failure to bring a suit on a filed L&M Lien within 1 year after the last provision of work, services, material, or equipment for which payment is sought or within 30 days after written notice is served on the claimant by the owner demanding the filing of an action causes all rights of the claimant under the L&M Lien to be forfeited. The effect of this requires an immediate discharge of the L&M Lien. N.J.S.A. 2A:44A-14. N.J.S.A. 2A:44A-22 provides that mortgages take priority over valid filed L&M Liens to the extent the mortgages secure: <ul>
 <li>Funds advanced or funds that the mortgagee is obligated to advance for the benefit of the mortgagor before the filing of an L&M Lien or Notice of Unpaid Balance and Right to File Lien; and</li>
 <li>Funds advanced after the filing of an L&M Lien or Notice of Unpaid Balance and Right to File Lien and those funds are applied in accordance with paragraphs (1) through (7) of N.J.S.A. 2A:44A-22(b).</li>
</ul> Under N.J.S.A. 2A:44A-22(b), every mortgage recorded after the filing of an L&M Lien or the filing of a Notice of Unpaid Balance and Right to File Lien shall have priority to the extent that the mortgage secures funds that have been applied to: <ul>
 <li>Payments of amounts due to claimants on filed L&M Liens or Notices of Unpaid Balance and Right to File Lien.</li>
 <li>Payment of all or part of the purchase price of the land secured by the mortgage;</li>
 <li>Payment of valid liens or encumbrances that can be established as prior to L&M Liens;</li>
 <li>Payment of taxes, assessments, or governmental liens or charges due at the time of or within 60 days after the payment, as required by the mortgagee as a condition of the loan;</li>
 <li>Loan and financing fees imposed by lender not in excess of 10% of the principal amount of the mortgage;</li>
 <li>Payment to the owner of a portion of the purchase price of the subject property where the improvements made or to be made have previously been paid by the owner, provided a loan budget as prescribed in the statute has been satisfied; or</li>
 <li>An escrow in an amount not to exceed 150% of the amount necessary to serve payment of charges described above.</li>
</ul> Nothing in N.J.S.A. 2A:44A-1 et seq. shall be deemed to supersede the mortgage priority provisions of N.J.S.A. 46:9-8 or diminish the effect of a Notice of Settlement. In the event of a creation, conveyance, lease or mortgage of an estate or interest in real property, an L&M Lien validly filed against such property after such estate or interest is created has priority over such estate or interest if the L&M Lien claimant filed a Notice of Unpaid Balance and Right to File Lien prior to the recording of the document evidencing such estate or interest. In such case, the L&M Lien relates back to the filing of the Notice of Unpaid Balance and Right to File Lien, provided the L&M Lien is filed within 90 days of the filing of the Notice of Unpaid Balance (120 days for residential properties). N.J.S.A.&nbsp;2A:44A-20.

Priority

The improvements covered by an L&M Lien include fixtures “necessary or appurtenant to a building or structure for use in conjunction” with the building, structure, or construction. The mortgage lender with a prior validly perfected lien on removable fixtures included in the foregoing should have priority based on the analysis in Section A above.

PRIORITY AS TO REMOVABLE FIXTURES

The Condominium Act (see N.J.S.A 48:8B-1 et seq.) as amended by A.B. A5002, allows associations to file liens to cover, in addition to unpaid assessments, interest thereon and any late fees, fines and reasonable attorney's fees that are authorized by the master deed or bylaws, any other late fees, fines and reasonable attorney's fees, as well as any expenses imposed or incurred in the collection of the unpaid assessment that are authorized by the master deed or bylaws. (See N.J.S.A. 46:8B-21(a) as amended by P.L. 2019, c. 68, &sect; 1). Second, it allows association liens for “customary condominium assessments,” (see N.J.S.A. 46:8B-21(b)), which the Condominium Act gives a limited priority over prior recorded mortgages and other liens (except municipal liens or federal tax liens) up to the value of the unpaid assessments for the 6-month period prior to their recording, to be “cumulatively renewed on an annual basis as necessary.” (See &nbsp;N.J.S.A. 46:8B-21(b)(1) as amended by P.L. 2019, c. 68, &sect; 1). The ability to continuously renew such assessments remains intact, even though there are certain limitations. Firstly, the limited priority typically expires on the first day of the 60th month after the lien's recording. Secondly, if an association previously recorded a lien for unpaid assessments that had priority over a prior recorded mortgage for a period of 60 months from the date of recording, the association's lien usually does not have priority over the prior recorded mortgage. (See N.J.S.A. 46:8B-21(b)(4), (5) as amended by P.L. 2019, c. 68, &sect; 1.) Furthermore, the A.B. A5002 introduced a new section to the New Jersey “Planned Real Estate Development Full Disclosure Act” (see N.J.S.A. 45:22A-21 et seq). This new section extends similar rights to file liens for assessments, which are currently granted to condominium associations under the Condominium Act, to all other types of “common interest community associations” except cooperatives.

PRIORITY AS TO COMMUNITY ASSOCIATION LIENS

Lenders typically require a Loan Policy of Title Insurance. (ALTA Form 2006)

FORM USUALLY REQUIRED BY LENDER

<ul>
 <li>ALTA 1-06 Street Assessments </li>
 <li>ALTA 3-06 Zoning </li>
 <li>ALTA 3.1-06 Zoning - Completed Structures </li>
 <li>ALTA 3.2-06 Zoning - Land Under Development </li>
 <li>ALTA 3.3-06 Zoning - Completed Improvement - Non-Conforming Use (New Jersey Variation)</li>
 <li>ALTA 4.1-06 Condominium </li>
 <li>ALTA 5.1-06 Planned Unit Development </li>
 <li>ALTA 6-06 Variable Rate Mortgage </li>
 <li>ALTA 6.1 Variable Rate Mortgage-Regulations </li>
 <li>ALTA 6.2-06 Variable Rate Mortgage - Negative Amortization</li>
 <li>ALTA 7-06 Manufactured Housing Unit </li>
 <li>ALTA 8.1-06 Environmental Protection Lien (New Jersey Variation)</li>
 <li>ALTA 8.2-06 Commercial Environmental Protection Lien (New Jersey Variation)</li>
 <li>ALTA 9.1-06 Covenants, Conditions and Restrictions, Owner's Policy - Unimproved Land (New Jersey Variation)</li>
 <li>ALTA 9.2-06 Covenants, Conditions and Restrictions, Owner's Policy - Improved Land (New Jersey Variation)</li>
 <li>ALTA 9.3-06 Covenants, Conditions and Restrictions, Loan Policy (New Jersey Variation)</li>
 <li>ALTA 9.6.1-06 Private Rights - Current Assessments Loan Policy (New Jersey Variation)</li>
 <li>ALTA 9.7-06 Restrictions, Encroachments, Minerals - Land Under Development - Loan Policy (New Jersey Variation)</li>
 <li>ALTA 9.8-06 Covenants, Conditions and Restrictions - Land Under Development - Owner's Policy (New Jersey Variation)</li>
 <li>ALTA 9.9-06 Private Rights - Owner's Policy (New Jersey Variation)</li>
 <li>ALTA 9.10-06 Restrictions, Encroachments, Minerals - Current Violations - Loan Policy (New Jersey Variation)</li>
 <li>ALTA 10-06 Assignment of Mortgage </li>
 <li>ALTA 10.1-06 Assignment and Date Down </li>
 <li>ALTA 11-06 Mortgage Modification </li>
 <li>ALTA 11.1-06 Mortgage Modification with Subordination</li>
 <li>ALTA 11.2-06 Mortgage Modification with Additional Amount of Insurance</li>
 <li>ALTA 12-06 Aggregation </li>
 <li>ALTA 12.1-06 Aggregation - State Limits - Loan </li>
 <li>ALTA 13-06 Leasehold - Owner's </li>
 <li>ALTA 13.1-06 Leasehold - Loan </li>
 <li>ALTA 14-06 Future Advance - Priority </li>
 <li>ALTA 14.1-06 Future Advance - Knowledge </li>
 <li>ALTA 14.2-06 Future Advance - Letter of Credit </li>
 <li>ALTA 14.3-06 Future Advance - Reverse Mortgage </li>
 <li>ALTA 15-06 Nonimputation - Full Equity Transfer </li>
 <li>ALTA 15.1-06 Nonimputation - Additional Insured </li>
 <li>ALTA 15.2-06 Nonimputation - Partial Equity Transfer </li>
 <li>ALTA 16-06 Mezzanine Financing </li>
 <li>ALTA 17-06 Access and Entry </li>
 <li>ALTA 17.2-06 Utility Access (New Jersey Variation) </li>
 <li>ALTA 17.1-06 Indirect Access and Entry </li>
 <li>ALTA 18-06 Single Tax Parcel </li>
 <li>ALTA 18.1-06 Multiple Tax Parcel - Easements </li>
 <li>ALTA 18.2-06 Multiple Tax Parcel Endorsement </li>
 <li>ALTA 18.3-06 Single Tax Parcel and ID </li>
 <li>ALTA 19-06 Contiguity - Multiple Parcels </li>
 <li>ALTA 19.1-06 Contiguity - Single Parcel </li>
 <li>ALTA 19.2-06 Contiguity - Specified Parcels </li>
 <li>ALTA 20-06 First Loss-Multiple Parcel Transactions </li>
 <li>ALTA 23-06 Co-Insurance - Single Policy </li>
 <li>ALTA 23.1-06 Co-Insurance - Multiple Policies </li>
 <li>ALTA 22-06 Location (New Jersey Variation) </li>
 <li>ALTA 25-06 Same As Survey (New Jersey Variation) </li>
 <li>ALTA 25.1-06 Same As Portion of Survey (New Jersey Variation)</li>
 <li>ALTA 26-06 Subdivision </li>
 <li>ALTA 28-06 Easement-Damage or Enforced Removal (New Jersey Variation)</li>
 <li>ALTA 28.1-06 Encroachments - Boundaries and Easements (New Jersey Variation)</li>
 <li>ALTA 28.2-06 Encroachments - Boundaries and Easements - Described Improvements (New Jersey Variation)</li>
 <li>ALTA 28.3-06 Encroachments - Boundaries and Easements - Defined Improvements and Land Under Development (New Jersey Variation)</li>
 <li>ALTA 29-06 Interest Rate Swap Endorsement - Direct Obligation</li>
 <li>ALTA 29.1-06 Interest Rate Swap Endorsement - Additional Interest</li>
 <li>ALTA 29.2-06 Interest Rate Swap Endorsement - Direct Obligation - Defined Amount</li>
 <li>ALTA 29.3-06 Interest Rate Swap Endorsement - Additional Interest - Defined Amount</li>
 <li>ALTA 30-06 One to Four Family Shared Appreciation Mortgage Endorsement </li>
 <li>ALTA 30.1-06 Commercial Participation Interest (New Jersey Variation)</li>
 <li>ALTA 31-06 Severable Improvements </li>
 <li>ALTA 33-06 Disbursement </li>
 <li>ALTA 34-06 Identified Risk Coverage </li>
 <li>ALTA 35-06 Minerals and Other Subsurface Substances - Buildings</li>
 <li>ALTA 35.1-06 Minerals and Other Subsurface Substances - Improvements</li>
 <li>ALTA 35.2-06 Minerals and Other Subsurface Substances - Described Improvements</li>
 <li>ALTA 35.3-06 Minerals and Other Subsurface Substances - Land Under Development</li>
 <li>ALTA 36-06 Energy Project - Leasehold/Easement - Owner's</li>
 <li>ALTA 36.1-06 Energy Project - Leasehold/Easement - Loan</li>
 <li>ALTA 36.2-06 Energy Project - Leasehold - Owner's</li>
 <li>ALTA 36.3-06 Energy Project - Leasehold - Loan </li>
 <li>ALTA 36.4-06 Energy Project - Covenants, Conditions and Restrictions - Land Under Development - Owner's</li>
 <li>ALTA 36.5-06 Energy Project - Covenants, Conditions and Restrictions - Land Under Development - Loan</li>
 <li>ALTA 36.6-06 Energy Project - Encroachments </li>
 <li>ALTA 36.7-06 Energy Project - Fee Estate - Owner's Policy</li>
 <li>ALTA 36.8-06 Energy Project - Fee Estate - Loan Policy</li>
 <li>ALTA 37-06 Assignment of Rents or Leases Endorsement</li>
 <li>ALTA 39-06 Policy Authentication </li>
 <li>ALTA 40-06 Tax Credit Endorsement </li>
 <li>ALTA 40.1-06 Tax Credit - Defined Amount Endorsement</li>
 <li>ALTA 42-06 Commercial Lender Group Endorsement</li>
 <li>ALTA 43-06 Anti-Taint </li>
 <li>ALTA 45-06 Pari Passu Mortgage - Loan Policy</li>
</ul> &nbsp; See Manual of Rates and Charges, New Jersey Title Insurance Rating Bureau, effective as of December 1, 2021, for additional details. &nbsp;

New Jersey

Mortgage Law Summary

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Mortgage Law Summary for New Jersey

New Jersey

Mortgage Law Summary

Continue reading theMortgage Law Summary for New Jersey

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Mortgage Law Summary for New Jersey