USA – NEW JERSEY Law and Practice Contributed by: David Freylikhman, Cory Mitchell Gray, David Jensen and Jody Saltzman, Greenberg Traurig LLP
New Jersey recognises the doctrine of equitable subordination. Under this doctrine, a mortgagee who negligently accepts a mortgage without knowledge of intervening encumbrances will subrogate to a first mortgage with priority over the intervening encumbrances to the extent that the proceeds of the new mortgage are used to satisfy the old mortgage. This provides the new lender with the same priority as the old lender. Please note that if the new lender has actual knowledge of the prior encumbrances, it is not Lenders in New Jersey may be exposed to envi - ronmental liability for hazardous substances affecting their collateral under federal and state laws. However, New Jersey has created “safe harbours” for lenders which, in general, shields lenders if they act properly under the law. New Jersey law provides that, if a lender does not participate in the management of a facility, it is not deemed an owner and, therefore, not the discharger of hazardous substances. A lender is not deemed to be involved in management if it responds to an environmental issue and remedi - ates it or directs its borrower to do so, nor is it required to perform an environmental inspection prior to making a loan to avail itself of this safe harbour. In addition, taking title to the property after a foreclosure sale with the intention of sell - ing it in order to realise on the collateral falls within the safe harbour. 3.9 Effects of a Borrower Becoming Insolvent If the borrower becomes insolvent and is the debtor in a bankruptcy proceeding, any previ - ously commenced enforcement actions will be subject to the automatic stay of the Bankruptcy entitled to the priority described. 3.8 Lenders’ Liability Under Environmental Laws
Code. However, provided that the mortgage was properly recorded and there are no defects in the mortgage itself, the priority of the lender’s mortgage will remain intact. Throughout the pen - dency of the foreclosure action, the property will typically be operated by a receiver, if requested by the lender. Until ten days after the actual sheriff’s sale of a property ordered to be sold pursuant to a judg - ment of foreclosure, the borrower retains its equity of redemption and can regain control of the property by paying off the balance of the mortgage loan, together with all costs, attor - neys’ fees and interest as calculated in accord - New Jersey does not currently have any exist - ing, pending or proposed rules, regulations or requirements regarding recording taxes in con - nection with mortgage loans or mezzanine loans related to real estate. 4. Planning and Zoning 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning New Jersey has adopted the Municipal Land Use Law, which imposes certain uniform require - ments on municipalities with respect to land development. However, New Jersey is a home rule state and, accordingly, controls with respect to design and appearance are primarily local in nature and vary by municipality. Other gov - ernmental authorities with jurisdiction over the affected site may impose such obligations (see 4.3 Regulatory Authorities ). ance with applicable law. 3.10 Taxes on Loans
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