Out-of-state lenders must be mindful of New Jersey's statutory filing requirements before commencing a foreclosure action in New Jersey because the nature and structure of your business dictates what statute applies and what filing requirements must be met.

Foreign corporations that conduct business in New Jersey must file a certificate of authority with the state or their foreclosures actions will be dismissed. This point was recently demonstrated in SPCP Group, LLC v. F II, LLC, A-5916-10T2, 2012 WL 2377820 (N.J. Super. Ct. App. Div. June 26, 2012), where the appellate division affirmed the dismissal of the plaintiff's foreclosure complaint against defendants on parcels of real property. In that case, the trial court concluded, among other things, that SPCP, the out-of-state plaintiff, lacked standing to commence the foreclosure action in New Jersey because it had not filed a certificate of doing business in the state under the Business Corporation Act. The trial court acknowledged that in order to conduct business in New Jersey, a foreign corporation must file a certificate of authority from the New Jersey Secretary of State, including a certification the entity is in good standing in the jurisdiction of its incorporation. See N.J.S.A. 14A:13-4. The failure to obtain such a certificate precludes a corporation from commencing any action or proceeding in any New Jersey court--including foreclosure actions--under N.J.S.A. 14A:13:11. The trial court also noted that the prohibition extends to (1) any successor in interest of such foreign corporation, except any receiver, trustee in bankruptcy or other representative of creditors of such corporation and (2) any assignee of the foreign corporation, except an assignee for value who accepts an assignment without knowledge that the foreign corporation should have but has not obtained a certificate of authority in this State. Thus, the court affirmed the lower courts dismissal of the foreclosure action without prejudice.

Unlike foreign corporations, foreign banks are excluded from the Business Corporation Act and this decision does not apply to foreign banks.

The bottom line is that out-of-state creditors must be aware of New Jersey's statutory requirements before commencing a foreclosure action. Given the time and expense of litigation, foreign mortgagees need skilled legal counsel to efficiently navigate New Jersey's choppy statutory filing requirements.

Summer Associate Adam Busler contributed to this post.