NJ Court Rules Nonprofit Right of Second Refusal Unconstitutional

A recent unpublished decision by the New Jersey Appellate Division affirmed that the Community Wealth Preservation Program’s nonprofit right of second refusal is unconstitutional as applied by the statute. The Court held that the right of second refusal violated the Takings Clause because it allowed non-profits the right to purchase the home without allowing the property to go to a competitive auction. This process directly blocked the generation of any market-driven surplus funds – effectively wiping out any of the home’s remaining equity. As such, the Court’s decision to deem this provision of the of the statute will help to preserve important protections for surplus equity and competitive foreclosure sales.

All other provisions of the statute for the Community Wealth Preservation Program remain in effect subject to any amendment.

If you have questions about this decision or its potential impact on mortgage lenders, servicers, investors, or other industry stakeholders, please Contact Padgett Law Group. Our team continues to monitor legal developments affecting creditors' rights and the mortgage servicing industry throughout Illinois and across our footprint.