USA - NEW JERSEY Law and Practice Contributed by: Steven Fleissig, David Freylikhman, Cory Mitchell Gray and David Jensen, Greenberg Traurig LLP
3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders See 2.6 Important Areas of Law for Foreign Investors . There are no specific New Jersey laws relative to this issue other than general corporate laws which require all entities which earn money from businesses located in New Jersey to be author - ised to do business in New Jersey. Earning money from a borrower located in New Jersey sufficiently constitutes doing business in New Jersey such that authorisation (to do business in the state) is required. If authorisation is required and not obtained, the lender may be barred from bring claims before the courts in New Jersey until such time as all required state taxes have been paid. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security New Jersey does not currently have a mortgage tax. If a lender forecloses on its mortgage and accepts a deed in lieu of foreclosure and seeks to have the mortgage survive the conveyance, the RTF will be applied on the outstanding balance of the mortgage loan. In addition, the “mansion tax” will be imposed on the transaction (certain classified properties) if the outstanding balance of the mortgage exceeds USD1 million. If the lender elects to discharge its mortgage prior to or simultaneously with the deed in lieu of transaction, there will not be any RTF or man - sion tax imposed. 3.5 Legal Requirements Before an Entity Can Give Valid Security Generally, there are no New Jersey laws or requirements that require compliance by an entity providing security to a lender. Lenders and title insurance companies will review a borrow -
er’s organisational documents to confirm that all approvals and consents from the borrower’s owners and/or officers required thereunder have been obtained. 3.6 Formalities When a Borrower Is in Default With respect to commercial transactions only, debtor protections, if any, would appear in the loan documents. These might include notice and an opportunity to cure a default before it becomes actionable by the lender. With respect to residential foreclosures, laws enacted during the 2008 recession require mortgage lenders to take many time-consuming steps before they can foreclose a mortgage loan. As a practical matter, New Jersey permits only judicial foreclosures, which are lengthy proceed - ings; even with respect to a non-contested com - mercial loan default, judicial foreclosure typically requires not less than nine months to one year to conclude. This time frame may enable a bor - rower to attempt to seek alternative financing or an amicable resolution of the dispute between it and the lender. Once a lender elects to commence an enforce - ment action, there is nothing it needs to do to perfect, create, or enhance the priority of its mortgage. New Jersey is a race-notice state and, therefore, once a mortgage is recorded, its priority is established. Within the foreclosure process, there are steps a lender needs to take to maintain the priority of its mortgage, such as conducting a rundown title search to make sure its foreclosure complaint lists all junior lienors. The interests of those junior lienors will need to be extinguished through the foreclosure process. Counsel for the foreclosing lender will also file a lis pendens in the county where the property is
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