USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
and not obtained, the lender may be barred from bringing 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 a transaction, no RTF or mansion tax will be imposed. 3.5 Legal Requirements Before an Entity Can Give Valid Security Generally, no New Jersey laws or requirements necessitate compliance by an entity providing security to a lender. Lenders and title insurance companies will review a borrower’s organisa - tional 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 located to ensure that any new lienors cannot interfere with the foreclosure and will be bound by its outcome, even if not a party thereto. Real estate taxes, municipal water and sewer charg - es, and certain environmental liens will always have priority over a mortgage, regardless of when such charges are imposed. 3.7 Subordinating Existing Debt to Newly Created Debt A lender entitled to priority on its mortgage may agree to subordinate its priority to a subsequent mortgage lender’s mortgage through a subordi - nation or postponement agreement.
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