The recent holding by the New Jersey Supreme Court in Rosenthal & Rosenthal v. Vanessa Benun (a/k/a Vanessa Broochian and Elan Broochian) and Riker Danzig, 226 N.J. 41 (2016), is a clarion call to the New Jersey legislature to take action. The action required is an amendment to the mortgage priority statute in New Jersey to enable a senior, commercial lender to make future advances of principal, up to the stated amount in the mortgage or credit agreement, without the risk of being primed by a subsequent lender who is granted a mortgage on the same real property. The statutory amendment will override New Jersey common law, the latest chapter of which is reflected in the Rosenthal decision.

At issue in Rosenthal was the priority of two mortgages in favor of Rosenthal & Rosenthal, which were recorded in 2000 and 2005, respectively, to secure a guaranty of all amounts outstanding from time to time under factoring agreements provided by Rosenthal. The priority of the Rosenthal mortgages was challenged by Riker, Danzig, Scherer, Hyland & Perretti (“Riker Danzig”), which was granted a mortgage on the same real property in 2007. The Riker Danzig mortgage secured legal fees owed to the law firm when the mortgage was granted, as well as legal fees subsequently incurred. At the time the mortgage was granted, Riker Danzig was owed $1,679,701.33, which had ballooned to over $3 million by the time the priority battle with Rosenthal erupted.

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