This article updates a similarly titled article published in the Oct. 21, 2019, edition of the New Jersey Law Journal.

By way of quick recap, "clogging" is shorthand for a principle rooted in ancient English common law that a borrower who secures a loan with a mortgage on real estate holds an inviolable right to redeem the property from the lender by repaying the debt up until the point when that right is legally foreclosed through proper judicial procedures. Stratagems such as a lender obtaining a "deed in lieu of foreclosure" or an  option to purchase the property from the borrower at the time of loan origination are generally considered void in the lender's hands as a "clog" on the borrower's equitable right of redemption.

The clogging doctrine is often invoked to re-characterize transactions that in substance are intended to be secured mortgage loans, though in form do not appear as such (often referred to as "equitable mortgages"). The example cited in the previous article is the landmark New Jersey case, Humble Oil & Refining Company v. Doerr, 123 N.J. Super. 530 (Ch. Div., 1973). The facts are rather complex and will not be re-explained herein. In brief, the form of the transaction was a "lease-leaseback" arrangement between an oil company and its customer who owned property on which it operated a gas station and which it mortgaged to a bank. The substance, however, was determined by the court to be a commercial mortgage loan on which the gas station owner was the primary obligor and the oil company, its guarantor. Just as the clogging doctrine precludes a mortgage lender from extracting a purchase option from the borrower in addition to the mortgage, the court held that a guarantor is similarly so precluded; therefore, the option contained in the lease from the gas station owner to the oil company was ruled void.