Atlantic County officials are hailing a New Jersey Superior Court ruling that they say protects homeowners from losing equity in foreclosed properties.
The court ruled in favor of Atlantic County Sheriff Joseph O’Donoghue in a consolidated case challenging the constitutionality of a provision in New Jersey’s Community Wealth Preservation Program (CWPP) that granted certain nonprofit organizations a right of second refusal at sheriff’s sales.
County Executive Dennis Levinson said the decision safeguards vulnerable homeowners during one of the most difficult periods of their lives.
“This is a win for homeowners throughout New Jersey,” Levinson said. “We live in the highest-taxed state in the country, and the state would continue to take and take if allowed. We will not stand by and allow that to occur.”
The Superior Court found that the provision depriving homeowners of the opportunity to receive fair market value for their foreclosed properties violated the Takings Clause of the Fifth Amendment to the U.S. Constitution.
Under the original Community Wealth Preservation Program, qualified nonprofit organizations could exercise a right of second refusal to purchase foreclosed properties at the “upset price,” the minimum acceptable bid established for a sheriff’s sale. County officials argued that the process prevented homeowners from benefiting from surplus equity that could be realized through competitive bidding.
As a result of the ruling, nonprofit organizations seeking to purchase properties through sheriff’s sales will be required to participate in competitive bidding rather than acquiring properties at the upset price, according to O’Donoghue.
“Losing a home is one of the most traumatic circumstances one may face,” O’Donoghue said. “We should not add to that burden by eliminating a property owner’s right to legitimate profits earned. None of us knows when we may fall on hard times.”
O’Donoghue credited the Atlantic County Law Department for its role in the case after he raised concerns about the law with County Counsel N. Lynne Hughes and Assistant County Counsel Arthur Murray. The Law Department intervened in the litigation on behalf of the sheriff.
County officials said the ruling could have statewide implications by ensuring that homeowners retain the opportunity to recover surplus equity generated through competitive bidding at sheriff’s sales, rather than losing those proceeds under the previous provisions of the Community Wealth Preservation Program.
