Insights

On December 6, New Jersey Gov. Chris Christie signed into law an Act permitting lenders to file a summary action to foreclose mortgages on vacant and abandoned residential property. The Act's purpose is to mitigate the foreclosure crisis in New Jersey by creating an expedited foreclosure process for abandoned homes. Proponents of the Act hope that it will help stabilize the residential real estate market by reducing the time it takes to complete a foreclosure and thereafter return the property to an occupied status, by permitting the lender to have the sheriff conclude a sale in short order.

The bill that Gov. Christie signed into law was sponsored by Senate Economic Growth Committee Chairman Raymond J. Lesniak (D-Union). It has a narrower focus than a bill Sen. Lesniak introduced in February 2012, the Residential Foreclosure Transformation Act. That bill would have established a state-run corporation under the New Jersey Housing and Mortgage Finance Agency to purchase and rehabilitate abandoned foreclosed homes and use them as affordable housing. Gov. Christie vetoed the bill, citing budget concerns.

The Act's General Provisions

The Act allows lenders to bring a summary action in the Superior Court of New Jersey to foreclose a mortgage debt secured by residential property that is vacant and abandoned. Additionally, a lender may file an application to proceed in a summary manner at any time after filing a foreclosure action if the residential property that is the subject of the foreclosure action is believed to be vacant and abandoned. Under the Act, a court may enter a final residential mortgage foreclosure judgment if it finds, by clear and convincing evidence, that the residential property is vacant and abandoned as defined by the Act and that a review of the pleadings and documents filed with the court supports the entry of such a judgment. A court will not enter a final residential mortgage foreclosure judgment under this Act if the court finds that the property is not vacant or abandoned, or that the mortgagor or any other defendant has filed an answer, appearance, or other written objection that is not withdrawn, and the defenses or objection asserted by the mortgagor or other defendant provide cause to preclude the entry of a final judgment.

Definition of "Vacant and Abandoned"

The Act defines "vacant and abandoned" residential property to mean "residential real estate with respect to which the mortgagee proves, by clear and convincing evidence, that the mortgaged real estate is vacant and has been abandoned." Real property will be deemed "vacant and abandoned" if the court finds that the mortgaged property is not occupied by a mortgagor or tenant and at least two of the following conditions exist:

1. overgrown or neglected vegetation;
2. the accumulation of newspapers, circulars, flyers, or mail on the property;
3. disconnected gas, electric, or water utility services to the property;
4. the accumulation of hazardous, noxious, or unhealthy substances or materials on the property;
5. the accumulation of junk, litter, trash, or debris on the property;
6. the absence of window treatments such as blinds, curtains, or shutters;
7. the absence of furnishings and personal items;
8. statements of neighbors, delivery persons, or government employees indicating that the residence is vacant and abandoned;
9. windows or entrances to the property that are boarded up or closed off or multiple window panes that are damaged, broken, and unrepaired;
10. doors to the property that are smashed through, broken off, unhinged, or continuously unlocked;
11. a risk to the health, safety, or welfare of the public, or any adjoining or adjacent property owners, exists due to acts of vandalism, loitering, criminal conduct, or the physical destruction or deterioration of the property;
12. an uncorrected violation of a municipal building, housing, or similar code during the preceding year, or an order by municipal authorities declaring the property to be unfit for occupancy and to remain vacant and unoccupied;
13. the mortgagee or other authorized party has secured or winterized the property due to the property being deemed vacant or unprotected or in danger of freezing;
14. a written statement issued by any mortgagor expressing the clear intent of all mortgagors to abandon the property;
15. any other reasonable indicia of abandonment.

Procedural Requirements to Institute a Summary Action

The Act requires a lender, in addition to the service of process required by the New Jersey Court Rules, to establish that a process server has made two unsuccessful attempts to serve the mortgagor or occupant at the residential property. These attempts must be at least 72 hours apart and during different times of the day -- either before noon, between noon and 6 p.m., or between 6 p.m. and 10 p.m. The Act further requires that a lender, with any order to show cause served as original service of process or a motion to proceed summarily, serve a notice that the lender is seeking to proceed summarily for entry of a residential foreclosure judgment because the property is vacant and abandoned. Additionally, when a property is deemed vacant and abandoned as defined by the Act, a lender is not required to serve the debtor with the notice to cure required by Section 6 of the Fair Foreclosure Act.

Sheriff's Sale

If the court makes a finding in the foreclosure judgment that the property is vacant and abandoned, the sheriff is required to sell the property within 60 days of receipt of any writ of execution issued by the court.

When the Act Takes Effect

The Act takes effect immediately but will "remain inoperative until the first day of the fourth month next following the date of enactment," which will be April 1, 2013.

The attorneys at Day Pitney's Parsippany office would be pleased to discuss the new Act and to answer any questions about its application to mortgage foreclosure proceedings.