March 2025 CT

W hile foreclosure is a major collections tool for community associations across New Jersey, many board members and industry professionals may be unaware that New Jersey’s foreclosure law has just undergone its most significant change in living memory. On January 12, 2024, Governor Phil Murphy signed into law Assembly Bill A5664/Senate Bill S4240, commonly known as the “Community Wealth Preservation Program” or “CWPP.” This sweeping legis lation fundamentally changes how foreclosure sales are conducted in several ways, most significantly the rights it affords to so-called “Nonprofit Community Development Corporations” at sheriff’s sales of foreclosed properties. When a property is foreclosed, it is sold at a “sheriff’s sale” — a public auction conducted by the sheriff of the county in which the property is located. The goal is for the property to be bid on by members of the public, ideally to be sold at or around its fair market value. The CWPP allows certain corporations to eliminate the bidding process by purchasing foreclosed properties outright at the foreclosing party’s “upset price” – an amount that generally reflects what the party is owed. In many cases, the “upset price” is far less than the fair market value of the property. Consider the example below: The Community Wealth Preservation Program and the Foreclosure of Properties in Community Associations By Kevin T. DelRocini, Esq., McGovern Legal Services, LLC

“The CWPP allows certain corporations to eliminate the bidding process...”

1. Party A forecloses on a mortgage. At the time of sheriff’s sale, Party A is owed a total of $100,000. Party A’s “upset price” is $100,000. The foreclosed property is valued at $500,000. 2. The property is announced at sheriff’s sale. Corporation B announces that it is exercising its right to buy the

property under the CWPP. Corporation B pur chases the property for Party A’s “upset price” of $100,000. No public bidding takes place. One thing should stand out in this exam ple: Corporation B purchased the property for a steal — $400,000 cheaper than its

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MARCH 2025