Right of Redemption in the State of New Jersey
This article seeks to provide a brief explanation of redemption rights in New Jersey when in foreclosure. It is not the complete recitation of redemption laws and should not be relied upon without the consultation of an attorney. If you are in foreclosure, you should seek an attorney to help you navigate the foreclosure process to obtain the most advantages results.
To begin, the right of redemption is defined by Blacks Law Dictionary as: The right to disincumber property or to free it from a claim or lien; specifically, the right (granted by statute only) to free property from the incumbrance of a foreclosure or other judicial sale, or to recover the title passing thereby, by paying what is due, with interest, costs, etc. Not to be confounded with the “equity of redemption,” which exists independently of statute but must exercised before sale. See Mayer v. Farmers’ Bank, 44 Iowa, 216; Millett v. Mullen, 90 Me. 400, 49 Atl. 871; Case v. Spelter Co., 02 Kau. 69, 01 Pac. 406.
The right of redemption rests in the center of foreclosure actions. The complaint issued in foreclosure seeks to do one main thing – terminate the right of redemption of the borrower and all other parties that have interest in the land. The termination of this right allows a buyer at a Sheriff auction to take clear title upon the perfection of the sale and issuance of the Sheriff Deed. In the state of New Jersey, there are two types of redemption, equitable and statutory. The statutory redemption law (N.J.S.A. 2A:50-4) provides that if the person entitled to the debt (lender, lien holder, etc.) pursues an action in the law division for the deficiency after a sheriff sale, the debtor will have the right to pay all amounts owed, including costs of the innocent purchaser at the sheriff sale (taxes, upkeep, etc.) and take the property back. This means that even after you have been foreclosed and a sale has been conducted, if you are sued personally for the debt, you now have the statutory right to redeem, up and until 6 months have expired after the entering of judgment in the law division. There are exceptions to this right. The equity of redemption on the other hand is an estate held by the borrower which is created at the time of the execution of the mortgage. It allows up and until 10 days after the foreclosure sale to allow the borrower to pay principal, interest, and costs to take the property back (discussed below).
Who can redeem?
There are two types of persons who have the right to redeem. The first is the holders of lesser rights such as junior liens and tenants. The second is the borrower of the mortgage or any other person who subsequently holds the borrowers right of redemption (for example, borrower provides quit claim deed to relative, who now has the right to redeem).
What exactly needs to be paid to redeem? First and foremost the principal amount of the mortgage debt. Then interest must be paid, including costs that the lender has put out in an effort to protect its interest, such as upkeep, repairs, taxes, assessments and the payment of government liens. Counsel fees and costs are also collectable, but keep in mind the that the Court sets a limit on how much attorney fees can be taken under Rule 4:42-9(a)(4). Search fees, service fees, and various other fees and charges are collectable under the court rules. Fees and charges that are prepayment penalties and late charges on installments which are due after the foreclosure complaint may not be included in the redemption amount pursuant to Clinton Capital Corp v. Staeb, 248 N.J. Super. 19 (Ch. Div. 1990) and Crest Sav. & Loan Ass’n v. Mason, 243 N.J. Super. 646 (Ch. Div. 1990).
How long do you have to exercise the right of redemption? In Hardyston Nat’l Bank v. Tartamella, 56 NJ 508, 513 (1970), the Supreme Court of New Jersey set out how long a party has to redeem. Their judgment extended a mortgagors (borrower) right to redeem 10 days after the sheriff sale. Why? The court rules provide that the mortgagor has 10 days after the sale has been conducted to file an objection to the sale under certain established grounds. The court ruled that during this 10 day period, the mortgagor can redeem. If you happen to file an objection during this 10 day period by motion, the Supreme Court has held that the right of redemption can actually be extended up and until the objection has been ruled upon (this can be over multiple weeks as motions are typically heard once all parties have had time to file a response and reply papers as per court rules).
Redemption is a Powerful Tool
Redemption is a powerful tool for those with equity (value) in the property. Be wary when you are pushed into a short sale by heavy handed realtors who tell you this is the best thing for your credit. By retaining a foreclosure lawyer, you can delicately craft a plan that could allow you to sell your property for near or market prices, and then exercise the right of redemption, paying your lender in full and putting the remaining monies in your pocket.
If you think you need help, it is important to speak with an attorney who can help you understand your options during this time. Protect your interests and have your questions answered. Contact us today, and we will go over all of your options. Call us at (973) 200-1111 or email us at [email protected]
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