New Jersey Bill Requires Creditors to Maintain Vacant Property During Pending Foreclosures

Effective July 14, 2014, New Jersey municipalities will be authorized to penalize creditors who do not address code violations or abate nuisances on vacant or abandoned residential property subject to a pending foreclosure action.

Pursuant to Assembly Bill A347, New Jersey municipalities will now be allowed "to require a creditor who initiates a foreclosure proceeding against a residential property located in the municipality to maintain the property in accordance with State and local housing codes if the property becomes vacant during the foreclosure proceeding."1 The bill amends N.J. Rev. Stat. 46:10B-51, which requires a foreclosing creditor to advise the municipal clerk of the foreclosure procedure and outlines the procedures by which a municipality is to notify the creditor of its responsibility to abate any nuisance or correct any code violation occurring on the subject property.2

A creditor initiating a new foreclosure action will have 10 days to provide the clerk of the municipality with notice of the action. The notice must contain: (i) the name and contact information for the representative of the creditor who is responsible for receiving complaints of property maintenance and code violations; (ii) the street address, lot and block number of the property; (iii) the full name and contact information of an individual located in New Jersey authorized to accept service on behalf of the creditor; and (iv) whether the property is subject to the Fair Housing Act.3

Upon receiving notice from the municipal clerk of a nuisance or code violation occurring on the abandoned or vacant property identified by the foreclosing creditor, the creditor will have 30 days to remedy the violation. Creditors who do not comply will be subject to penalties ranging from community service or a fine not to exceed $2,000 to imprisonment for not more than 90 days.4 Additionally, the bill does not alter a municipality's ability to recover the cost of public funds spent to abate a nuisance or correct a violation following a creditor's noncompliance.5

The penalties authorized in the bill can be assessed directly against the foreclosing creditor, even if such creditor does not own, or intend to own, the foreclosed-upon property. However, the creditor's maintenance responsibilities are triggered only in the event the owner vacates or abandons the property after foreclosure proceedings have been initiated. Similarly, the creditor's maintenance obligations under the bill will terminate once title to the property vests in a third party or the creditor (at which time, the creditor or titled party will assume the normal upkeep obligations incident to ownership).6

Creditors should be aware of the notice and maintenance responsibilities imposed by Assembly Bill A347, and may want to take steps to actively monitor properties subject to foreclosure proceedings they institute. Creditors should also consider developing a system to respond to and address notices of nuisances and code violations occurring on properties for which they are responsible to potentially avoid the newly authorized penalties.7

Notes

  1. Assembly Bill No. 347, Statement (2014).
  2. See N.J. Rev. Stat. 46:10B-51(b) (2013).
  3. Id. at 46:10B-51(a)(1).
  4. Assembly Bill No. 347, Statement [referencing N.J. Stat. Rev. 40:49-5 (establishing range of discretionary penalties available)].
  5. N.J. Rev. Stat. 46:10B-51(c).
  6. Id. at 46:10B-51(b).
  7. For further discussion of Assembly Bill A347, see Joy Harmon Sperling and Michael J. Fitzpatrick, "Creditors Must Maintain Abandoned Property Before Foreclosure Is Completed," New Jersey Law Journal, July 1, 2014.

Topics:  Abandoned Property, Foreclosure, Mortgages, Nuisance

Published In: Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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