USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
Investments The borrower may seek additional capital by accepting an investor from “preferred equity” source, usually a privately held fund established for such purposes. 3.2 Typical Security Created by Commercial Investors The security provided to a mortgage lender typi - cally consists of a first-priority mortgage loan and an assignment of leases and rents. In certain circumstances, a first-priority lender may allow secondary financing (ie, a second subordinate mortgage). Priority of a mortgage is based on its recording date and, although it is not required, some lenders elect to file UCC-1 financing statements in the state where the borrower was formed to secure its lien on other non-real estate assets. A mezzanine lender’s lien is secured by a pledge of ownership interests in the property owner, and such security interest can be perfected both by the filing of a UCC-1 financing statement in the state where the pledging principal of the bor - rower resides and, if the lender requires the borrower to “opt-in” to Article 8 of the UCC, by delivery of actual ownership certificates. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders See 2.6 Important Areas of Law for Investors . There are no specific New Jersey laws relative to this issue other than general corporate laws that require all entities that earn money from busi - nesses located in New Jersey to be authorised to do business in New Jersey. Earning money from a borrower located in New Jersey suffi - ciently constitutes doing business in New Jer - sey such that authorisation (to do business in the state) is required. If authorisation is required
• Class 3A where the property is a farm (but only if the farmland contains a building or structure intended or suited for residential use); • Class 4A commercial (other than industrial or apartment); and/or • Class 4C co-operative units. New Jersey recognises certain exemptions from the supplemental fee. The RTF is typically paid by the seller; see 8. Tax . 2.11 Legal Restrictions on Foreign Investors Foreign investors are required to register with the New Jersey Department of Treasury as a foreign entity authorised to do business in New Jersey. Acquisitions of commercial property are typically financed by mortgage loans, mezzanine loans and investments of preferred equity. Mortgages New Jersey is a lien theory state and, therefore, regardless of the language of the mortgage, title to real property does not vest in the mortgagee but remains with the borrower. The mortgage must be acknowledged and is recorded in the county wherein the property is located. Mezzanine Loans A mezzanine loan may be made to upstream entities secured by a pledge by the borrower’s principals of their ownership interests in the bor - rower. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
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