Utilizing Special Masters to Sell Commercial Real Property Collateral in Foreclosure During the COVID-19 Crisis.

By Douglas J. Ferguson, Esq.
February, 2021

One of the most frequent questions our firm’s lender clients have asked during the ongoing COVID-19 crisis is “can the bank foreclose on its commercial collateral, and if so how long will it take to sell the property at a sheriff’s sale?” The answer to the first part of the question is simple – yes, lenders are entitled to initiate and prosecute foreclosure actions during the pendency of the coronavirus state of emergency in New Jersey under Governor Murphy’s Executive Order 106.

The second part of that question as to when a lender can expose the property to sale is less clear. Executive Order 106 prevents homeowners from being removed from residential property as a result of a foreclosure proceeding during the ongoing coronavirus state of emergency, and for up to sixty (60) days thereafter. Recognizing the distinction between residential and commercial property in Executive Order 106, most county Sheriff’s Offices have started scheduling and holding sales for commercial property, as well as vacant or abandoned property.

However, some county Sheriff’s Offices are not scheduling sales for commercial property and will undoubtedly be facing an enormous backlog of sales at the expiration of the current state of emergency. When lenders find themselves foreclosing on commercial property in a county in which the Sheriff’s Office is not conducting sales for commercial property, an alternative may be to utilize a Special Master to sell the collateral in place of the Sheriff. Pursuant to N.J.S.A. 2A:50-64(3)(b) if the Sheriff fails to schedule a sale date within 150 days of the Sheriff’s receipt of any writ of execution, the foreclosing plaintiff may move for an Order appointing a Special Master to hold a foreclosure sale. The Order appointing a Special Master will relieve the Sheriff’s Office of their statutory duty as selling officer and permit the Special Master to conduct the sale.

Although the filing of the Motion to Appoint a Special Master is an additional step in the foreclosure process, it may be well worth the additional time and expense to be able to promptly realize upon a lender’s commercial real property collateral.