Alert: New Law Affecting New Jersey Foreclosure Sales

January 12, 2024, was the signature and effective date of New Jersey Assembly Bill 5664 (“AB 5664” or the “Act”) establishing the Community Wealth Preservation Program to enhance the ability of statutorily favored buyers to purchase property from sheriff’s foreclosure sales. The new protocols enable prospective owner-occupants, nonprofit community development corporations, foreclosed-upon defendants, next of kin of foreclosed-upon defendants, and tenants of foreclosed-upon defendants to purchase (via sheriff’s sales) and finance foreclosed-upon residential properties; this statutory assistance allows members of the favored class to tender a 3.5 % deposit. The law applies only to residential properties (comprised of not more than 4 units) which will be the primary residence of the bidder; the law does not apply to any real property which is acquired for investment, commercial, or business purposes or real property containing more than four residential units. 

The New Law:
AB 5664 amends and supplements P.L.1995, c.244, the New Jersey Fair Foreclosure Act (“FFA”) and amends N.J.S.22A:4-8 (the statute governing execution sale fees for sheriffs and other officers). The Act increases execution fees to ten (10) percent for sales that do not exceed $5,000 and five (5) percent for sales exceeding $5,000. These fees are increased from six (6) percent and four (4) percent, respectively. Further, the minimum fee for all sales, and the fee charged when the foreclosed property is purchased by the foreclosing plaintiff, is increased to $150.

The new law allows for certain successful bidders (the foreclosed-upon defendant, next of kin, a nonprofit community development corporation, or a bidder who shall occupy the property as the bidder’s primary residence for a period of at least eighty-four (84) months) to pay a 3.5% deposit of the announced upset price, with the balance due within ninety (90) business days. No interest accrues for the first sixty (60) days. Further, a bidder entitled to pay 3.5% deposit can pay the bid with financing if proof of preapproval is provided.

To facilitate the purposes of the Act, the foreclosing mortgagee must give notice of its upset price well in advance of the scheduled sheriff’s sale:

  1. Notice of the sheriff’s foreclosure sale is to be mailed to the primary address of the foreclosed-upon defendant and to the address of the foreclosed-upon residential property. The notice is to be mailed in an envelope that plainly states on its exterior that it contains a notice for the sale of the foreclosed-upon residential property. The language used on the exterior of the envelope must also comply with the Fair Debt Collection Practices Act.
  2. The foreclosing mortgagee must provide written notice of its upset price at least four weeks prior to the sheriff’s sale. That upset price is also to be posted on the Internet website of the sheriff’s office and on any other medium used to provide notice of the sheriff’s sale.
  3. The Act allows for some variance in the stated upset price if the sheriff’s sale is delayed or postponed, or if circumstances occur that require unforeseen advances to protect the borrower or the foreclosed-upon residential property in the event of vandalism, weather damage, or other emergency property preservation needs.

Potential Issues for Foreclosing Plaintiffs
It is important to note that the timeline for residential foreclosure sales covered by AB 5664 will likely increase. The “favored” bidders are allowed up to ninety (90) business days (that is 18 weeks – over 4 months) to pay the full bid price. Although a defaulting bidder will forfeit the 3.5% deposit and incur liability for interest accrued and costs incurred by the foreclosing plaintiff, collecting those modest amounts will likely be impractical. The 3.5% deposit will not be forfeited if failure to close is not the fault of the “favored” bidder.” While AB 5664 requires proof of pre-approved financing, it is not uncommon for pre-approved financing to fall through (i.e. the lender being dissatisfied with a property inspection or the appraised value is inadequate).

AB 5664 lacks direction and definitions necessary for practical implementation. “Next of kin” is not defined in the statute; that omission is certain to generate considerable litigation, particularly as the modern family structure continues to evolve. Foreclosing mortgagees routinely seek issuance of a “Certificate of Regularity” from a title abstractor to confirm that the foreclosure was properly conducted, thereby assuring insurable title for the property. Foreclosing mortgagees will need Court “comfort orders” confirming the adequacy of efforts made to identify and locate “next of kin.” If a minor next of kin is identified, is it the foreclosing mortgagee’s duty to apply to have a guardian ad litem appointed? If so, this will result in additional costs and delay for the foreclosing mortgagee. Practice Pointer: At the closing for every loan secured by a mortgage on owner-occupied 1-4 unit residential property in NJ, the lender should obtain a “certification of next-of-kin” in which the mortgagor certifies the identity and address of all next-of-kin who would be entitled to the benefits of AB 5664 and that none is a minor (or, identify the legal guardian of each minor); that certificate should include a covenant to update the information certified therein and that lender is entitled to rely upon the certificate (as updated in the future) for compliance with lender’s foreclosure requirements under AB 5664.

Prior to this recent legislation, foreclosed-upon mortgagors often filed a Chapter 13 Bankruptcy Petition on the eve of the sheriff’s sale. If the mortgagor can post the 3.5% deposit at the sheriff’s sale, the Chapter 13 filing is likely to be deferred until the 89th business day following the sale.

Since the Act creates a property right (the right to bid at a sheriff’s mortgage foreclosure sale) for the class of “favored bidders,” will tenants and next of kin be filing Chapter 13 cases in order to preserve the right to consummate a purchase of the foreclosed upon property?     

By its definition of residential property, AB 5664 will apply to residential mortgages collateralizing a personal guaranty of a commercial loan. Commercial lenders and workout officers should be sensitized to this consequence.


Foreclosure plaintiffs and junior lienholders should quickly adapt internal practices and processes to comply with the changes and new requirements in AB 5664. Harold Cohen and Ujala Aftab are available for further consultation and can be reached at hcohen@dilworthlaw.com or (856) 675-1950 and uaftab@dilworthlaw.com or (856) 675-1958.