[First Reprint]

ASSEMBLY, No. 486

 

STATE OF NEW JERSEY

 

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

 

 

By Assemblywoman VANDERVALK and Assemblyman ROBERTS

 

 

An Act concerning non-judicial foreclosures of commercial mortgages and supplementing Title 2A of the New Jersey Statutes.

 

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

    1. This act shall be known and may be cited as the "Commercial Mortgage Non-Judicial Foreclosure Act."

 

    2. a. The purpose of this act is to provide holders of commercial mortgages with a process for non-judicial foreclosure as an alternative to the judicial foreclosure process.

    b. Nothing herein shall be deemed to limit or prevent judicial foreclosure in accordance with the procedures provided by applicable rules and statutes, at any time prior to the completion of any sale pursuant to this act. 1The commencement of any action by a lender under this act may, at the sole discretion of the lender, be discontinued by the lender at any time prior to the completion of any sale pursuant to this act, whereupon the lender shall thereafter be entitled to pursue any rights the lender may have under this act or under any other statute or other law, including the right to pursue foreclosure through the judicial foreclosure process.

    c. Prior to the effective date of sale of the property subject to the commercial mortgage sold pursuant to section 12 of this act, the exercise by the lender of its rights under this act shall not in any way limit any rights pursuant to any other statute or other law, including the right to pursue foreclosure through the judicial foreclosure process. After the effective date of sale of the property, the lender's rights shall be limited as set forth in subsection b. of section 6 of this act. No provision of this act shall be construed to require a lender to exercise its rights under this act prior to instituting an action against a mortgagor or any other party, including any guarantor, in order to exercise any right the lender may have against a mortgagor or any other party or guarantor, including an action on a promissory note, loan agreement guaranty, indemnification agreement or obligation of a mortgagor or guarantor.1

 

    3. As used in this act:

    "Commercial mortgage" means a mortgage, security interest or 1[the like] other instrument1 which secures a loan made other than primarily for personal, family or household purposes, in which the security is real property located in this State, and which property, as of the execution of the mortgage, is other than a one, two, three or four-family unit dwelling in which at least one unit shall be, or is planned to be, occupied as a residence by the debtor who is a natural person or by the spouse, parent, brother, sister or child of the debtor or debtor's spouse.

    "Debtor" means the person or entity shown on the record of the commercial mortgage lender as being obligated to pay the note, or other evidence of 1[debt] an obligation1, secured by the commercial mortgage.

    1["Default" means a monetary default or an environmental default."

    "Environmental default" means the failure to comply with any requirement or covenant in the commercial mortgage, note or other loan agreement, which requirement or covenant concerns pollution or contamination of land, air or water; which failure may result in the contamination of property with hazardous or toxic substances and result in an obligation for clean-up costs, or which failure will otherwise have a material adverse affect on the value of the mortgaged property.]

    "Effective date of sale" means the earlier of (1) 30 days following the sale of the property subject to the commercial mortgage pursuant to section 12 of this act, or (2) if the mortgagee is the successful purchaser, the date of recording of the deed of sale pursuant to section 13 of this act.1

    "Lender" or "mortgagee" means any person or entity which makes or holds a commercial mortgage and any person or entity to which a commercial mortgage is assigned or otherwise transferred and shall include duly authorized agents.

    "Monetary default" means the failure to comply with any obligation in the commercial mortgage, note, bond or other loan agreement, with respect to payment of money to the lender, payment of real estate taxes, payment of premiums for required insurance, payment of governmental assessments or tax or other liens against the mortgaged property 1which would have priority over the commercial mortgage1, payment of other specified amounts, or payment of funds into escrow for any of the items set forth 1[. Failure to comply with obligations relating to the maintenance or use of the mortgaged property shall not be a monetary default] if such funds are not available for making agreed upon disbursements from the escrow account on a timely basis1.

    "Mortgagor" means the debtor and shall also include the owner of the property being sold subject to the power of sale permitted pursuant to this act.

 

    4. A commercial mortgage may contain a provision for a power of sale which authorizes the lender upon 1monetary1 default in the mortgage to 1foreclose the mortgage and1 sell the mortgaged property without instituting a foreclosure action 1through the judicial process1. The power of sale shall be exercised in accordance with the provisions of this act.

 

    5. If a lender issues a commitment in a transaction to make a commercial mortgage loan, which loan is intended to contain a power of sale provision pursuant to this act, the lender shall indicate in the commitment that the mortgage will contain the power of sale provision 1[and shall provide the mortgagor with specific information concerning the conditions under which a mortgagor may be liable for a deficiency under a power of sale]1.

 

    6. With respect to any commercial mortgage in which a power of sale is granted:

    a. The commercial mortgage shall state in bold and underlined language, substantially the following: "A power of sale has been granted in this commercial mortgage. A power of sale 1[may allow] allows1 the mortgagee to take the mortgaged property and sell it without instituting a judicial foreclosure action upon 1monetary1 default by the mortgagor under this commercial mortgage."

    b. 1[A mortgagor shall not be liable for any deficiency in the amount due and owing a mortgagee after a sale pursuant to this act unless the mortgagor specifically agrees to be liable for the deficiency by signature separate from the signature on the mortgage, which agreement and separate signature may either be on a separate document recorded with the mortgage or in the mortgage document. Failure to obtain the separate agreement and signature shall not limit a mortgagee's rights against any party or person in any way except to prevent the mortgagee from pursuing a deficiency judgment against the mortgagor after sale pursuant to this act. The amount of any deficiency shall be the difference between the amount obtained by the mortgagee from the sale of the mortgaged property and the total amount due under the mortgage loan documentation including principal, interest, late charges, default interest, and the reasonable costs and expenses of the sale, including the amount of attorney's fees fixed in the commercial mortgage by agreement, unless a portion of all of the fees are waived by the parties or the amount fixed is found by a court to be unconscionable. If such fees are found to be unconscionable or no fees are fixed in the commercial mortgage by agreement, a court may allow reasonable attorney's fees. If, in an action for a deficiency, the mortgagor shall establish that the fair market value of the property as of the date of the sale exceeded the sale price, then the deficiency otherwise obtainable under this subsection shall be reduced by the amount of the excess. Any action for a deficiency pursuant to the provisions of this subsection shall be commenced within 90 days after the date of the sale.] If a notice of monetary default has been provided to the mortgagor pursuant to section 8 of this act, the mortgagee may not realize on, or proceed to enforce a claim against, any collateral, other than the real property subject to the commercial mortgage, of the mortgagor or of any guarantor which serves as additional security for the debt secured by the commercial mortgage. This limitation shall apply until the mortgagee discontinues the power of sale process pursuant to this act by giving written notice to the mortgagor or until the mortgagee commences a judicial foreclosure. From and after the effective date of sale, any collateral other than the real property secured by the commercial mortgage given by the mortgagor or by a guarantor to secure the commercial mortgage shall no longer be subject to any rights, lien or claim of the mortgagee to cover any deficiency or shortfall in the amount due on the mortgage loan. Nothing in this subsection shall limit a mortgagee's rights to enforce obligations other than the commercial mortgage or any guarantees related thereto, including rights with respect to any collateral securing those obligations which collateral may also secure the commercial mortgage.1

 

    7. Nothing in this act shall be construed to impair the right of any person who has a right to redeem the 1mortgaged1 property from redeeming 1[prior to the execution and delivery of a deed pursuant to section 14 of this act] that property up to and including the day which is not later than 30 days after the date the mortgaged property is sold pursuant to section 12 of this act1, upon payment of the amount owed, including all expenses 1, as these amounts are described in subsection c. of section 9 of this act1 .

 

    8. a. If the commercial mortgage authorizes a mortgagee to exercise a power of sale, the mortgagee, after 1monetary1 default by a mortgagor and before exercising a power of sale, shall send the mortgagor a notice of 1monetary1 default.

    b. A notice of 1monetary1 default shall be sent by certified mail, return receipt requested, to the mortgagor at the mortgagor's address specified in the commercial mortgage as the place to which notices are to be sent, or if no address is specified for receipt of notices, to the address of the mortgagor as set forth in the mortgage and if changed, to the address specified in a written notice of a new address received 1by the mortgagee1 prior to the date of the notice of 1[intention] monetary default. Notice pursuant to this subsection b. shall be considered to have been given to a mortgagor if it is sent by certified mail, return receipt requested, to the address as set forth herein or if served in the manner of service of the notice of sale as set forth in section 10 of this act1.

    c. The notice shall state, in a manner 1reasonably1 calculated to make the mortgagor aware of the situation:

    (1) the particular commercial mortgage under which the mortgagee intends to exercise a power of sale;

    (2) the nature of the 1monetary1 default claimed;

    (3) that the mortgagee has accelerated the maturity of the debt, if that is the case;

    (4) any right the mortgagor has to cure the 1monetary1 default, 1including1 the amount to be paid or other action necessary to cure, and the time within which the cure shall take place 1in order to prevent the mortgagee's exercise of its right of sale1 ;

    (5) 1[the methods by which] that1 the mortgagor's ownership 1[of the mortgaged property]1 may be terminated 1by a sale of the property pursuant to this act1 ;

    (6) 1[any right the mortgagor has to transfer the mortgaged property to another person subject to the commercial mortgage and of] if the commercial mortgage specifically permits transfer of the mortgaged property subject to the commercial mortgage,1 the transferee's right, if any, to succeed to the rights of the mortgagor in curing the 1monetary1 default;

    (7) 1[the circumstances under which] that1 the mortgagor's right to possession will be terminated 1on the earlier of (a) 30 days following the sale of the property subject to the commercial mortgage pursuant to section 12 of this act, or (b) if the mortgagee is the successful purchaser, the date of recording of the deed of sale pursuant to section 13 of this act,1 and that upon 1such1 termination 1,1 the mortgagor may be evicted from the mortgaged property 1[by judicial process]1;

    (8) the right of the mortgagor to any surplus from the sale 1[ and, for any deficiency, a statement of the circumstances under which the deficiency will be asserted]1; 1and1

    (9) 1[that if the mortgagee intends to exercise a power of sale upon failure by the mortgagor to cure the default in the time provided by this section, the mortgagee shall so state] the right of the mortgagor who claims not to be in monetary default or claims any other valid defense to the non-judicial foreclosure by power of sale to commence a summary proceeding pursuant to section 15 of this act1.

    d. A mortgagor, or any one authorized to act on behalf of the mortgagor, shall have the right 1to cure the monetary default, deaccelerate and reinstate the commercial mortgage by tendering the amount or performance specified in subsection e. of this section1 at any time, up to the date and time of sale as set forth in the notice of sale pursuant to subsection b. of section 9 of this act, 1[to cure the default, de-accelerate and reinstate the commercial mortgage by tendering the amount or performance specified in subsection e. of this section] or, if extended pursuant to paragraph (2) of subsection d. of section 9 of this act, up to the date and time to which the sale is extended which date shall also be subject to the notice of sale requirements of sections 9 and 10 of this act, or, if delayed pursuant to subsection b. of section 12 of this act, to the date and time to which the sale is postponed or continued, provided that the notices required under subsection b. of section 12 have been properly given1. The payment or tender shall be made to the lender, holder or servicing agent. Provided, however, that if a mortgagee can establish in a court of competent jurisdiction that the mortgagor has a pattern of waiting until more than 30 days after receipt of notice of 1monetary1 default to cure the 1monetary1 default pursuant to subsection e. of this section, or can establish that the mortgagor is not using the right to cure in good faith, the court may 1, if there is no other basis for delay of the sale,1 order the sale of the mortgaged premises no sooner than 30 days after a notice is published pursuant to subsection c. of section 10 of this act.

    e. To cure a 1monetary1 default under this section, a mortgagor shall:

    (1) pay or tender to the person whose name, address and phone number is given in 1[this] the1 notice 1of monetary default1 , in the form of cash, cashier's check, or certified check, all sums 1[which would have been]1 due 1[in the absence] as set forth in the notice1 of 1monetary1 default, 1[at] and all other sums due which have accrued after the date of the notice of monetary default and up to1 the time of payment or tender 1, including the total amount due under the commercial mortgage loan documentation including past-due principal payments, interest, late charges, default interest, any other sum of money that is due under the commercial mortgage loan documentation, and the reasonable costs and expenses of collection of the foregoing, including the amount of attorney's fees fixed in the commercial mortgage by agreement, unless a portion of all of the attorney's fees are waived by the parties or the amount fixed for attorney's fees is found by a court to be unreasonable. If the attorney's fees are found to be unreasonable or no attorney's fees are fixed in the commercial mortgage by agreement, the court may allow reasonable attorney's fees1; 1and1

    (2) perform any other obligation which the mortgagor 1[would have been] was1 bound to perform 1[in the absence of default or the exercise of an acceleration clause, if any; and

    (3) pay or tender costs, if any, and reasonable attorney's fees] under the commercial mortgage1.

    f. To cure a 1monetary1 default under this section, a mortgagor shall not be required to pay any charge, fee or penalty attributable solely to the exercise of the right to cure a 1monetary1 default as provided for in this act.

    g. Cure of 1monetary1 default reinstates the mortgagor 1, for the purposes of this act,1 to the same position as if the 1cured monetary1 default had not occurred. It nullifies, as of the date of cure, any acceleration of any obligation under the mortgage, note or bond arising from the 1monetary1 default 1which was cured1 .

    h. The right to cure a 1monetary1 default under this section is independent of any right of redemption or any other right or remedy under the common law, principles of equity, State or federal statute, or rule of court.

    1i. Within 10 days of mailing or serving of the notice of monetary default, the mortgagee may file with the recording officer in the county in which the mortgaged property is located, or if located in more than one county, in each county in which the mortgaged property is located, a notice of non-judicial foreclosure, which shall be in substantially the same form and have the same effect as a notice of lis pendens filed pursuant to N.J.S.2A:15-6 et seq.1

 

    9. a. If, upon 1monetary1 default by a mortgagor, a mortgagee elects to use a power of sale granted in the commercial mortgage, it shall execute a notice of sale in written form directed to the mortgagor, any holder of a commercial mortgage or other lien of record, which is subordinate to the mortgagee's interest, and any other person having an interest, claim or lien of record in the mortgaged property whose interest, claim or lien the mortgagee seeks to foreclose by the exercise of its power of sale.

    b. 1(1)1 The notice of sale shall state the name of the mortgagor, the occurrence of a 1[breach or] monetary1 default 1[of the contract or commercial mortgage]1, the general 1[nature thereof] description of the monetary default1 such as "failure to make a payment due," "failure to pay taxes," 1["failure to maintain the property"]1 or 1[the like] other similar terms1, the election to use the power of sale, the date, time and place when the mortgaged property will be sold, the legal description of the mortgaged property as it appears in the commercial mortgage and any street address of that property, 1which appears in the commercial mortgage, and as reasonably determined by the lender by title search or otherwise,1 any holder of a prior commercial mortgage or other lien of record, and any person having an interest, claim or lien of record in the mortgaged property whose interest, claim or lien the mortgagee seeks to foreclose by the exercise of its power of sale, and shall designate the person or persons whose unknown successors are being served. The notice shall state any 1terms and1 conditions applicable to the sale, including whether the mortgaged property may be sold in separate lots or parcels.

    1(2) With respect to any party having an interest, claim or lien which the mortgagee seeks to foreclose, the notice shall provide information which reasonably apprises the party of the nature of the party's interest. If the party is the State of New Jersey or the United States of America, the provisions of N.J.S.2A:45-1 et seq. and 26 U.S.C. §7425, respectively, shall govern the contents of the notice.1    c. The notice shall advise the mortgagor of the mortgagor's right 1, pursuant to this act,1 to redeem the mortgaged property from foreclosure by paying 1to the mortgagee not later than 30 days after the date the mortgaged property is sold pursuant to section 12 of this act,1 the total amount due under the 1commercial1 mortgage loan documentation including 1[principal, interest, late charges, default interest, and the reasonable costs and expenses, if any, of a sale or proposed sale, including the amount of attorney's fees fixed in the commercial mortgage by agreement, unless a portion of all of the fees are waived by the parties or the amount fixed is found by a court to be unconscionable, to the mortgagee prior to the execution and delivery of a deed pursuant to Section 13 of this act] : principal; interest; late charges; default interest; prepayment fee, charge, penalty or similar payment; any other sum of money due under the commercial mortgage loan documents and the reasonable costs and expenses of a sale including the amount of attorney's fees fixed in the commercial mortgage by agreement, unless a portion of all of the attorney's fees are waived by the parties or the amount of the attorney's fees is found by a court to be unreasonable1 , and shall advise all other persons claiming an interest in that property that the property will be sold subject to their claims unless they elect to join the exercise of the power of sale or that the mortgagee claims an interest superior to the claims of such persons and that their interests 1[may be subject to being] shall be1 terminated by the sale unless they take appropriate legal action.

    d. (1) The date of sale specified in the notice of sale shall be at least 30 days from the date the notice is served, mailed or posted pursuant to section 1[9] 101 of this act, as applicable, and also shall be at least 1[120] 901 days after the date a notice of 1monetary1 default is mailed 1or served1 by the mortgagee to the mortgagor pursuant to subsection b. of section 8 of this act. 1Failure of a person to receive timely notice of sale shall not adversely affect the title of the purchaser at the sale unless the person which did not receive timely notice of sale proves by a preponderance of the evidence that there was lack of substantial compliance with the requirements of this section and section 10 of this act and that the lack of substantial compliance was the proximate cause of that person's alleged injury and the lack of substantial compliance materially prejudiced that person's interest in the mortgaged property.1

    (2) If the 1monetary1 default by the mortgagor is due to the loss of a tenant or tenants in the property subject to the 1commercial1 mortgage and less than 50% of the total rentable square footage in the mortgaged property is rented 1at the time of a monetary default, or if the monetary default by the mortgagor is due to the inability of a tenant or tenants who occupy 50% or more of the total rentable square footage in the mortgaged property to pay rent at the time of monetary default1, the mortgagor may request and shall be entitled to an extension of the date of sale for a period of up to 1[60] 901 days. Any such request shall be made in writing and shall be sent certified mail, return receipt requested, to the mortgagee or its agent, at least 15 days prior to the first scheduled date of sale. A mortgagor shall be entitled to only one such extension 1for a monetary default.

    (3) If a mortgagor cures a monetary default and at a later time is subject to another monetary default, the provisions of paragraph (2) of this subsection d. shall not apply if the monetary default is the result of the loss of the same tenant or tenants or the result of the inability of the same tenant or tenants to pay rent, whose loss or failure to pay rent was responsible for an earlier monetary default1.

 

    10. a. The notice of sale shall be personally served by the mortgagee's attorney or the attorney's agent or any other competent adult not having a direct interest in the mortgaged property being foreclosed. 1In addition, the Sheriff of each county and the Sheriff's respective deputies are authorized, upon request of the mortgagee, to make service of the notice of sale, as provided herein. The Sheriff shall be entitled to the same fees for service as for the service of a summons and complaint in a Superior Court action.1 Service shall be made as follows:

    (1) (a) Upon an individual other than a minor under 14 years of age or an incompetent person, by delivering a copy of the notice to the individual personally; or by leaving a copy thereof at the dwelling house or usual place of abode with a competent member of the household of the age of 14 years or over then residing therein; or by delivering a copy thereof to a person authorized by appointment or by law to receive service of process on the individual's behalf;

    (b) Upon a minor under 14 years of age, by delivering a copy of the notice personally to the minor's father, mother or guardian of the person or a competent adult member of the household with whom the minor resides;

    (c) Upon an incompetent person, by delivering a copy of the notice personally to the guardian of the person or a competent adult member of the household with whom the incompetent resides; or, if the incompetent is living in an institution, then to the director or chief executive officer of the institution;

    (2) Upon a domestic or foreign corporation, by serving, in the manner prescribed in subsection a. of this section, either an officer, director, trustee, or managing or general agent; or any person authorized by appointment or by law to receive service of process on behalf of the corporation; or the person at the registered office of the corporation in charge thereof. If service cannot be made upon any of the foregoing, then it may be made upon the person at the principal place of business of the corporation in this State in charge thereof, or if there is no place of business in this State, then upon any servant of the corporation within this State acting in the discharge of his duties. If it appears by affidavit of mortgagee's attorney or of any person having knowledge of the facts that after diligent inquiry and effort, personal service cannot be made upon any of the foregoing and if the corporation is a foreign corporation, then, consistent with due process of law, service may be made by mailing, by registered or certified mail, return receipt requested, a copy of the notice to a registered agent of service, or to its principal place of business, or to its registered office.

    (3) Upon an unincorporated association which is subject to suit under a recognized name and upon a partnership or upon a limited liability company by serving, in the manner prescribed in subsection a. of this section, an officer, a managing or general agent, or, in the case of a partnership, a partner, or, if it appears that after diligent inquiry and effort, service cannot be made upon any of the foregoing, then, consistent with due process of law, by mailing, by registered or certified mail, return receipt requested, a copy of the notice to a registered agent for service, or to its principal place of business, or to its registered office.

    (4) Upon the State of New Jersey, by registered, certified or ordinary mail or by delivering a copy of the notice personally to the Attorney General or to any person in his office designated by him in writing filed with the Clerk of the Superior Court.

    (5) Upon any county, municipality, or other public body, by delivering a copy of the notice personally to the presiding officer or to the clerk or secretary thereof.

    b. Notice of sale shall be mailed by the mortgagee, if by due diligence, personal service cannot be made on an individual pursuant to paragraph (1) of subsection a. of this section, within seven days of the publication required by subsection c. of this section, to the residence or place where the party to be served usually receives mail, unless it shall appear after due diligence that such residence or place cannot be ascertained after inquiry; and then the publication pursuant to subsection c. of this section shall be deemed sufficient.

    c. A notice of sale shall be published once in a newspaper which is published in the county in which the property is located, or, if there is none, in a newspaper published in this State circulating in such county. In any instance when personal service has not been able to be made on all parties pursuant to subsections a. and b. of this section, a copy of the notice shall be posted upon the property to be sold within seven days after publication. The notice shall be published at least 30 days before the date appointed for selling the property; and

    d. 1[A notice of sale shall be recorded in the office of the county clerk or register of deeds of each county wherein the mortgaged property is situated within 10 days after compliance with the provisions of section 9 of this act. The recording of the notice of sale pursuant to this subsection shall serve as notice of the pendency of the procedure to any person acquiring a subsequent interest in the property. To verify compliance with the notice provisions of section 9 of this act and subsections a., b. and c. of this section, proof of receipt, return of service or affidavit in lieu of personal service, or copies thereof and proof of publication of the notice of sale shall be recorded in the office of the county clerk or register of deeds of each county wherein the mortgaged property is situated any time before the recording of the mortgagee's deed executed pursuant to the sale under this act.] Within 10 days following the date of sale as provided pursuant to section 12 of this act, the mortgagee shall cause to be recorded with the recording officer in the county in which the mortgaged property is located, or if located in more than one county, in each county in which the mortgaged property is located, a true copy of the notice of sale, together with true copies of proofs of service, however made, of the notice of monetary default and notice of sale, including but not limited to, proof of publication and proof of posting, if required, upon each party upon whom or which the notice of monetary default, notice of sale, or both, were served. Failure to comply with the provisions of this subsection shall not adversely affect the title of the purchaser at the sale or the validity of the non-judicial foreclosure proceedings.

    e. Service of the notice of sale on the mortgagor pursuant to this section shall be made within one year from the date of effective service of the notice of monetary default as provided pursuant to section 8 of this act. The foregoing time limitation shall be tolled from and after the date of filing of any legal action by the mortgagor objecting to the sale of the property pursuant to this act until this action is finally concluded.1

 

    11. The sale 1[may] shall1 be held in any county where part of the mortgaged property to be sold is situated at the time designated in the notice of sale, or a date to which the sale has been continued as provided by this act, on a day other than a Saturday, Sunday or legal holiday, between the hours of nine o'clock a.m. and five o'clock p.m. at a specified place on that property, at the courthouse, 1or1 at another specified place 1[or at a place of business of the mortgagee] in the county1.

 

    12. a. On the date and at the time and place designated in the notice of sale, the mortgagee exercising the power of sale shall cause the mortgaged property to be sold at public auction to the highest bidder. If the mortgaged property is legally divisible into separate lots or parcels, conditional bids shall be received for each and every separate lot or parcel and for the entire property as a whole. The mortgagee shall determine which conditional sale or sales result in the highest total price bid for all of that property. An attorney 1or other agent1 for the mortgagee may conduct the sale, and act at the sale as the auctioneer for the mortgagee. Any person, including the mortgagee or mortgagor may bid at the sale. Every bid shall be deemed an irrevocable offer, until the sale is completed and the sale shall not be deemed completed until the purchaser pays the price bid in a form satisfactory to the mortgagee. If a purchaser other than the mortgagee, when required by the mortgagee, fails to post cash or certified funds equal to 15% of the amount bid for the mortgaged property, the mortgagee may proceed with the sale and may accept the next highest bid. The party that fails to make 1[such] the1 payment shall be liable to any person who suffers loss or expenses, including attorney's fees, occasioned thereby and the mortgagee may thereafter in any sale of the mortgaged property reject any bid of that person. The 15% deposit shall be placed and held in escrow by the mortgagee pending completion of the sale. In the event a purchaser fails to complete the transaction of sale within 30 days of the sale or a longer reasonable time permitted by the mortgagee 1in writing1 , any deposit shall be applied first to the expenses of the sale and the balance to the debt, and the purchaser shall be liable to any person who suffers loss or expenses, including attorneys fees, occasioned by the resale of the mortgaged property.

    b. The person conducting the sale, for any cause deemed in the interest of the mortgagee, the mortgagor, or both, may postpone or continue the sale or change the place of the sale to another location permitted by law, by giving notice, including the new time and place, by public declaration at the time and place last appointed for the sale and in any other manner reasonable under the circumstances which shall include publication one time at least 10 days prior thereto of a notice of the new date, time and place of sale, such notice to be directed to the same persons as the original notice of sale, and proof of publication then to be filed in the office of the county clerk of each county wherein the mortgaged property to be sold is situated any time before the recording of the mortgagee's deed executed pursuant to the sale under this act. No other notice of the postponed, continued, changed or relocated sale is required.

    1c. The purchaser at the sale shall have the right to possession and control of the property subject to the sale as of the effective date of sale. If a person other than the mortgagee is the successful bidder at the sale, the right to possession and control shall vest in the mortgagee after the effective date of sale until the date of delivery of the deed, at which time the purchaser shall have the right of possession and control.1

 

    13. a. The sale shall be closed at a time and under reasonable conditions 1determined and1 specified by the mortgagee at the time of the sale 1, provided however, that if the purchaser is not the mortgagee, closing shall occur no sooner than 30 days after the date the mortgaged property is sold pursuant to section 12 of this act1 . Upon receipt of payment in form satisfactory to the mortgagee, the mortgagee shall execute and deliver a deed, without warranty or covenants to the purchaser, except as specifically set 1[for] forth1 in this act, and which identifies the mortgagee's and other interests foreclosed and the parties involved and indicates where the documents evidencing those interests are recorded, 1recites the amount of the successful bid,1 and recites that the deed is executed by the mortgagee exercising a power of sale after a 1[breach or] monetary1 default and sale under this act. Signature and title or authority of the person signing the deed as grantor is sufficient proof of the signer's authority to sign. Further proof is not required even though the signer is also named as grantee in the deed. 1[The] Recording of the1 mortgagee's deed shall 1[raise] constitute1 a presumption of compliance with the requirements of this act 1[regarding the exercise of the power of sale and the sale of the mortgaged property, including the giving of the notice of intention to foreclose and of sale and the conduct of sale. Such deed shall constitute conclusive evidence of the meeting of such requirements in favor of purchasers for value and without actual notice so long as the failure to meet those requirements would otherwise render the sale only voidable and, even if the sale is void after the passage of two years from the date of the recording of the deed] . Any person whose right, title, lien, claim or interest was divested by a proceeding under this act, or person claiming by, under or through any such person, who claims injury by reason of any alleged failure to comply with any of the requirements of this act, shall not have any claim against the mortgaged property unless that person proves by a preponderance of the evidence, that there was a lack of substantial compliance with this act, that the lack of substantial compliance was the proximate cause of that person's alleged injury, and the lack of substantial compliance materially prejudiced that person's interest in the mortgaged property. After a period of one year from its recording, the mortgagee's deed shall constitute conclusive evidence of the validity and regularity of the proceedings in favor of bona fide purchasers for value and without actual notice1.

    b. 1[The] Recording of the1 mortgagee's deed, pursuant to compliance with the provisions of this act, 1shall have the same effect as delivery of a valid sheriff's deed in a judicial foreclosure process and1 shall operate to convey to the purchaser the title, interest and claim of the mortgagee and of the mortgagor and their respective successors in interest, and of all persons claiming an interest in the property sold which was acquired subsequent to the recording of the commercial mortgage pursuant to which the power of sale is exercised and prior to delivery of the mortgagee's deed 1[or who join in the exercise of the power of sale]1. 1[Such] Thirty days after the date the mortgaged property is sold pursuant to section 12 of this act, such1 conveyance shall be absolute, without right of redemption and clear of all liens, claims, or interests to the extent provided in this section, if the record shows that all necessary parties were duly notified or served with process as 1[provided for herein] required pursuant to this act1 and except for any statutory right of redemption which may be held by the United States of America under authority of 1[28 U.S.C.§2410] 26 U.S.C. §74251.

 

    14. a. The mortgagee shall apply the proceeds of the sale of the mortgaged property as follows:

    (1) To the reasonable costs and expenses of exercising the power of sale and of 1the1 sale, including the payment of reasonable attorney's fees actually incurred; and

    (2) Unless otherwise required by law, to the payment of the contract or indebtedness secured by the commercial mortgage, the payment of all other obligations provided in or secured by the commercial mortgage, and the obligations of any junior lienholders or encumbrancers, in order of their priority as otherwise provided for by law. After payment in full to all junior lienholders and encumbrancers, payment shall be made to the party who is the owner of the property immediately preceding the sale.

    b. 1[The] In lieu of making payments to subordinate lienholders or encumbrancers or the mortgagor, the1 mortgagee may elect to deposit all or any part of the sale proceeds 1which exceed the amount due to the mortgagee1 with the clerk of the Superior Court subject to order of the Superior Court upon the application of any interested party. Upon deposit of such monies together with a legal description of the property whose sale produced the proceeds, the mortgagee shall be discharged from all responsibility for acts performed in good faith according to the provisions of this 1[act] section1.


    15. a. A mortgagor who claims not to be in 1monetary1 default or claims any other valid defense to the non-judicial foreclosure by power of sale may commence a summary proceeding in Superior Court to contest the proposed sale.

    b. Nothing herein shall be deemed to affect any right of possession a mortgagee may have to the property prior to the completion of the sale 1or1 to limit the equitable jurisdiction of the courts 1[with respect to mortgages or with respect to the provisions of this act]1.

 

    116. a. The county recording officer shall cause notices of non-judicial foreclosure, amended notices of non-judicial foreclosure, warrants to discharge these notices and releases thereof to be filed and indexed in the same manner as are notices of lis pendens, amended notices of lis pendens, warrants to discharge these notices and releases thereof. The fees charged for recording and indexing these notices shall be the same as the fees charged by the county recording officer for similar actions taken with respect to notices of lis pendens. A marginal notation shall be made upon the record of each mortgage in the same manner as is provided by N.J.S.2A:15-9, and the county recording officer may charge the appropriate fees for these services.

    b. The county recording officer shall cause notices of sale, amended notices of sale, warrants to discharge these notices and releases thereof to be recorded and indexed in the same manner as are instruments recorded and indexed pursuant to section 1 of P.L.1939, c.170 (C.46:16-1.1). The fees charged for recording and indexing these notices shall be the same as the fees charged by the county recording officer for recording and indexing an instrument pursuant to section 1 of P.L.1939, c.170 (C.46:16-1.1). A marginal notation shall be made upon the record of each mortgage for which any such notices, amended notices, warrants or releases have been submitted, and the county recording officer may charge the appropriate fees for these services.1

 

    1[16.] 17.1 This act shall take effect immediately.

 

 

 

Provides for a non-judicial foreclosure of commercial mortgages.