Bill Text: NJ A3458 | 2020-2021 | Regular Session | Introduced
Bill Title: The "Real Estate Installment Contract Act."
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2020-02-25 - Introduced, Referred to Assembly Financial Institutions and Insurance Committee [A3458 Detail]
Download: New_Jersey-2020-A3458-Introduced.html
Sponsored by:
Assemblyman JOHN J. BURZICHELLI
District 3 (Cumberland, Gloucester and Salem)
SYNOPSIS
The "Real Estate Installment Contract Act."
CURRENT VERSION OF TEXT
As introduced.
An Act concerning real estate installment sales contracts and supplementing Title 46 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. This act shall be known and may be cited as the "Real Estate Installment Contract Act."
2. As used in this act:
"Property" means any real property located in this State which has no more than four dwelling units, one of which shall be or is intended to be occupied by the purchaser or a member of the purchaser's immediate family as a residence at the time that a real estate installment contract is originated.
"Purchaser" means any person acquiring an interest in property by means of a real estate installment contract.
"Real estate installment contract" or "contract" means an agreement which by its terms is not required to be fully performed by the parties to the agreement within one year of the date of the agreement and under which the seller agrees to convey title to a property to the purchaser and the purchaser agrees to pay the purchase price by periodic installment payments while the seller retains legal title to the property, and the purchaser retains an equitable interest therein.
"Seller" means any person conveying title by means of a real estate installment contract.
"Title" means the fee simple estate, leasehold estate, or estate for years vested in the seller at the time of the execution of a real estate installment contract.
3. a. A real estate installment contract shall be in writing, and, upon execution by the seller and purchaser, the seller shall deliver the original or a duplicate original of the contract to the purchaser in recordable form. The contract shall contain the following information:
(1) the names and mailing addresses of the parties to the contract;
(2) the date on which the contract was signed by each party and the effective date of the contract;
(3) a description of the property which is the subject of the contract, which description shall be in a form legally sufficient to convey title to real property;
(4) the aggregate purchase price of the property affected;
(5) any additional charges or fees imposed on the purchaser by the terms of the contract;
(6) the amount of the purchaser's down payment, if any;
(7) the principal balance owed, which shall be the aggregate purchase price less the down payment;
(8) the amount and due date of each installment payment;
(9) a complete description of any mortgage or other lien encumbering the property, including the name and address of the holder of each mortgage or lien and the amount due to each holder thereof, or, in the alternative, a statement that no such liens exist;
(10) a statement that, if the seller defaults in payment of a mortgage or other lien encumbering the property, the purchaser may, at the purchaser's option, make payments, which payments shall be credited by the seller against any payments required to be made by the purchaser under the terms of the contract;
(11) a statement that, once the purchaser has fully performed all of the purchaser's obligations under the contract, the seller shall deliver to the purchaser a deed conveying all of seller's right, title and interest in and to the property described in the contract;
(12) a statement as to which party shall be responsible for the payment of taxes, assessments, and other municipal charges against the property from the effective date of the contract;
(13) a statement containing a description of any pending order issued by any public agency against the property arising from a violation of any statute, administrative regulation or local ordinance, or in the alternative, a statement that no such order exists; and
(14) acknowledgment of the execution of the contract by both seller and purchaser before a notary public or other officer entitled by law to take acknowledgements.
b. A seller shall not encumber a property sold pursuant to a contract, by execution of a mortgage unless the indebtedness secured by the mortgage, or aggregate indebtedness if there is more than one mortgage, is less than the balance due under the contract.
c. Within 20 days after a contract has been executed by both the seller and purchaser, the seller shall record the contract, or a short form thereof, in the office of the county clerk or register in the county where the property is located.
d. Within 30 days of the date that the purchaser shall have fully performed all of the purchaser's obligations under the contract, the seller shall deliver a deed to the purchaser in recordable form, conveying to the purchaser all of the seller's right, title and interest in the property.
4. a. Upon breach or default by any party with respect to any provision of a contract, which default continues beyond the expiration of any applicable notice provision and period to cure the default provided for in the contract, or upon the failure of any party to comply with any provision of this act, the party aggrieved thereby may bring an action for legal or equitable relief in Superior Court as may be appropriate in the circumstances; except that if the seller seeks relief against the purchaser on the grounds set forth in section 5 of this act, the seller shall comply with the provisions thereof before commencing suit.
b. If, in any action commenced in Superior Court to enforce the terms of a contract, the seller demands forfeiture of the interest of the purchaser in the property, the action shall be deemed to be one in the nature of a strict foreclosure of a mortgage encumbering real property, in which case the seller shall be deemed to be the mortgagee and the purchaser shall be deemed to be the mortgagor.
5. a. If a purchaser defaults in a payment or payments due, or otherwise defaults on a contract, or is in breach of any other obligation imposed upon the purchaser by the contract, the seller, prior to commencing an action in Superior Court to enforce the terms of the contract as provided in section 4 of this act, shall serve upon the purchaser a written notice which:
(1) reasonably identifies the contract and describes the property affected thereby;
(2) specifies the nature and extent of the breach or default by the purchaser; and
(3) notifies the purchaser that unless the breach or default is cured within 30 days of service of the notice, the seller may file suit in Superior Court to enforce the terms of the contract, in which case judgment may be entered against the purchaser, which may result in the forfeiture of the purchaser's interest in the property and the removal of the purchaser from the property.
b. The notice shall be entitled "Notice of Breach or Default under Real Estate Installment Contract." The seller shall serve the notice upon the purchaser by hand or by registered or certified mail, return receipt requested, to the last known address of the purchaser. If a purchaser cures the breach or default within 30 days after service of the notice, the seller shall be barred from filing suit in Superior Court to enforce the contract. If the purchaser fails to cure the breach or default within 30 days after the service of the notice, the seller may file suit in Superior Court to enforce the contract, as provided in section 4 of this act.
c. The seller may only
bring an action to enforce the forfeiture of the purchaser's interest in the
property and for recovery of possession of the property by use of the procedures
for foreclosure and judicial sale of residential real property available to
lenders pursuant to the provisions of the "Fair Foreclosure Act," P.L.1995,
c.244 (C.2A:50-53 et seq.). For purposes of an action to enforce a contract
under this act, the seller shall be deemed to be a lender, and the purchaser
shall be deemed to be a debtor, as those terms are defined in the "Fair
Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.).
6. The provisions of the civil usury law, R.S.31:1-1, and the criminal usury law, N.J.S.2C:21-19, shall apply to real estate installment contracts in a manner, which may include compliance and enforcement mechanisms, to be prescribed by the Commissioner of Banking and Insurance by regulation adopted pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).
7. This act shall take effect on the 60th day following enactment and shall apply to real estate installment contracts entered into on or after that date, but the Commissioner of Banking and Insurance may take anticipatory administrative action in advance of the effective date as shall be necessary for the implementation of section 6 of this act.
STATEMENT
This bill, entitled the "Real Estate Installment Contract Act," provides that, in connection with the use of a real estate installment contract to purchase residential real property, the contract must contain certain disclosures, the purchaser has legal and equitable remedies available upon a seller's default on the contract, and a seller must adhere to certain procedures in enforcing the contract upon a purchaser's default. As an alternative to the more traditional use of a mortgage to finance the purchase of real property, a real estate installment contract allows a purchaser of real estate to make installment payments to the seller towards the eventual purchase of the property, while the seller retains title to the property as security for the purchaser's obligations until the completion of all contract terms.
The bill requires a real estate installment contract to be in writing and to disclose certain information, including: the aggregate purchase price of the property; any additional charges or fees imposed on the purchaser by the terms of the contract; the principal balance owed; the amount and due date of each installment payment; and a complete description of any mortgage or other lien encumbering the property. In addition, the bill requires the seller to record either the contract or a short form of the contract, and puts certain restrictions on the seller's ability to hold or place mortgages on the property.
If there is a breach or default by either the seller or purchaser under a real estate installment contract, legal or equitable relief may be sought by either party in Superior Court. Certain procedures must be followed in situations in which the purchaser defaults on a payment or otherwise defaults on the contract or is in breach of any other obligation. The seller shall provide the purchaser with a written notice which specifies the nature and extent of the breach or default and which notifies the purchaser that if the purchaser does not cure the default within 30 days of receiving the notice, the seller may file suit in Superior Court to enforce the terms of the contract, in which case judgment may be entered against the purchaser, which may result in the forfeiture of the purchaser's interest in the property and the removal of the purchaser from the property. The seller may only bring an action to enforce the forfeiture of the purchaser's interest in the property and for recovery of possession of the property by use of the procedures for foreclosure and judicial sale of residential real property available to lenders pursuant to the provisions of the "Fair Foreclosure Act," P.L.1995, c.244 (C.2A:50-53 et seq.).
The bill clarifies that the State's civil and criminal usury laws apply to real estate installment contracts in a manner to be prescribed by the Commissioner of Banking and Insurance by regulation. As an alternative to the more traditional use of a mortgage to finance the purchase of real property, a real estate installment contract allows a purchaser of real estate to make installment payments to the seller towards the eventual purchase of the property, while the seller retains title to the property as security for the purchaser's completion of all contract terms. While the regulation of real estate installment contracts under the bill includes some provisions relating to mortgage loan law, to which usury laws normally apply, other provisions relate to contract law, to which usury laws do not normally apply. Accordingly, the bill clarifies that the protections afforded consumers by the State's usury laws also apply to real estate installment contracts.
The bill allows the commissioner to take anticipatory administrative action in advance of the effective date of the bill as necessary for the enforcement of usury laws.
