September 4, 2025

On August 28, 2025, the Mercer County Chancery Division ruled that the Nonprofit Community Development Corporation (hereinafter “nonprofit”)’s “right of second refusal” under New Jersey’s Community Wealth Preservation Program (“CWPP”) is unconstitutional. In the consolidated docket, Atlantic County Sheriffs and Joseph O’Donoghue v. State of New Jersey, Docket No. MER-C-000094-24, the trial court held that the second right of refusal under N.J.S.A. 2A:50-64(g) is unconstitutional as applied to both property owners and junior lienholders. It found that eliminating competitive bidding and the resulting loss of equity violate the Takings Clause of the Fifth Amendment to the United States Constitution and Article I, Paragraph 1 of the New Jersey Constitution. The ruling eliminates the ability of nonprofits to exercise second-refusal rights going forward.

Friedman Vartolo LLP filed an amicus curiae brief on behalf of the American Institute of Servicing and Legal Executives (AISLE), a national trade organization of which FV is a founding member, inter alia in support of the position that the nonprofit right of second refusal should be invalidated. However, because the Court also held that the CWPP is not retroactive, any matter where a property was sold to a nonprofit under the CWPP outside of the consolidated docket will remain undisturbed. The Court also left intact the right of first refusal for occupying owners, heirs, and tenants, although its reasoning signals that this provision may be vulnerable to future constitutional challenge. This decision is among the first to test the CWPP in court and marks a pivotal clarification: nonprofits no longer enjoy statutory second-refusal rights at sheriff’s sales in New Jersey.