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Natale v. Santos

2006 WL 1417988 (N.J. Super. App. Div. 2006) (Unpublished)

NOTICE OF SETTLEMENT — Even if a closing takes place within the forty-five day period after the filing of a Notice of Settlement, failure to record the closing documents within the forty-five period deprives a buyer or lender of the Notice’s statutory protections.

After executing a contract for the sale of real estate, the buyer recorded a Notice of Settlement. Thereafter, but before closing, the seller obtained another mortgage loan on the property, and the second mortgage was recorded before closing. The HUD settlement statement made no reference to the second mortgage. The buyer delayed recording its deed until more than four months after the date the Notice of Settlement had been recorded. The buyer did not know of the second mortgage. Two years later, the second mortgagee notified the buyer that the second mortgage was in default.

The buyer claimed protection from the second mortgagee under the Notice of Settlement Act. Although the filing of a notice of settlement is intended to insulate a proposed conveyance or lien against intervening conveyances, the pertinent deed or mortgage must be filed within 45 days of the date of filing the notice of settlement. If the closing instruments are not recorded within the 45 day period, the notice of settlement is void and any lien filed during that period immediately attaches and takes priority over the closing instruments. Even if the closing takes place within the 45 day period, failure to record the closing documents within the 45 day period deprives the buyer of the statutory protections.

The buyer obtained a default judgment against its seller for the value of the outstanding mortgage loan plus interest, and voluntarily dismissed its complaint against its title company. The Court indicated that buyers in other similar cases may be entitled to relief from their seller or title company. Because the buyer did not raise the issue at trial whether the seller had capacity to grant a mortgage after contract execution, the Court refused to consider the issue on appeal.

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