An Act revising the tax lien foreclosure process, revisingvarious parts of the statutory law, and supplementing chapter 5 of Title 54 ofthe Revised Statutes.
Be ItEnacted by the Senate and General Assembly of theState of New Jersey:
1. (New section) TheLegislature finds and declares that:
a. On May 25, 2023, theUnited States Supreme Court issued a decision in a case before it, Tyler v.Hennepin County, Minnesota, et al., 143 S. Ct. 1369 (2023), that has veryimportant implications for the rights of all property owners, and specifically,New Jersey law governing property taxes on real property.
Ms. Geraldine Tyler owned acondominium in Hennepin County, Minnesota on which accumulated approximately$15,000 in unpaid real estate taxes, interest, and penalties. The countyseized the condominium and sold it for $40,000. Instead of returning theexcess $25,000 from the sale to Ms. Tyler, the county kept the money for itselfas permitted by that state’s law. Ms. Tyler filed suit, alleging that thecounty unconstitutionally retained the excess value of her condominium beyondthe $15,000 tax debt in violation of the Takings Clause of the Fifth Amendmentto the United States Constitution, as well as the Excessive Fines Clause of theEighth Amendment. In an opinion written by Chief Justice Roberts for aunanimous Court, the Court found that Ms. Tyler had plausibly alleged a takingunder the Fifth Amendment. Since Ms. Tyler agreed that relief under theTakings Clause would fully remedy her harm, the Court did not decide whethershe also alleged an excessive fine under the Eighth Amendment. However, theacknowledgement that Ms. Tyler had plausibly alleged a taking under the FifthAmendment has the effect of limiting what a lienholder can collect when a courtforecloses the right of redemption of a lien on the lienholder’s behalf to onlythe property taxes paid by the lienholder, plus interest. In the words ofChief Justice Roberts, “(t)he taxpayer must render unto Caesar what isCaesar’s, but no more.” In this case, the party that kept the excess funds wasa public entity, not a private lienholder.
On December 4, 2023, the NewJersey Appellate Division court issued its decision in 257-261 20thAvenue Realty, LLC v. Alessandro Roberto, et al., finding that New Jersey’stax sale law, which established the confiscation of a property owner’s equitywhen a tax lien on a property is foreclosed, violates the Takings Clause of theFifth Amendment to the United States Constitution as determined in the Tylercase, and also approved the retroactive application of the decision to anyforeclosure case pending final judgment to account for the new principle of lawestablished in Tyler (The Appellate Division court referred to this as“pipeline retroactivity”).
b. New Jersey’s “tax salelaw,” R.S.54:5-1 et seq., allows the holder of a tax sale certificate, whetherit is a municipality or a private lienholder, the ability to foreclose theright of the property owner to redeem the lien by paying to the tax salecertificate holder all of the property taxes, plus interest, that the holder ofthe tax sale certificate paid to the municipality. Under R.S.54:5-86, anaction to foreclose the right of redemption of a tax lien is filed with theSuperior Court. Under R.S.54:5-87, as part of the action to foreclose theright of redemption, the court has the authority to “adjudge an absolute andindefeasible estate of inheritance in fee simple, to be vested in thepurchaser.” In other words, the Superior Court is authorized to grant title ofthe property to the lienholder, without requiring the lienholder to return theexcess equity in the property to the prior owner. This authority applies toboth municipalities, as lienholders, as well as to private lienholders. Thelanguage of R.S.54:5-85 reinforces this authority of the Superior Court:“[t]he provisions of this article shall be liberally construed as remediallegislation to encourage the barring of the right of redemption by actions inthe Superior Court to the end that marketable titles may thereby be secured.”
c. The New JerseyConstitution expressly extends property rights protections to actions taken byprivate parties. Article I, paragraph 20 of the constitution provides that privateproperty shall not be taken for public use without just compensation. Thatparagraph goes on to provide that “(i)ndividuals or private corporations shallnot be authorized to take private property for public use without just compensationfirst made to the owners.”
d. Case law reinforces theprovisions of Article I, paragraph 20.
(1) In Hyde v. SomersetAir Service, Inc., 1 N.J. Super. 346, 349-350 (Ch. Div. 1948), the court stated that “. . .in such cases it is a question of what’s what rather than who’s who. Indeed,the Legislature or governmental agencies cannot constitutionally confer uponindividuals or private corporations, acting primarily for their own profit,although for public benefit as well, any right to deprive persons of the lawfulenjoyment of their property.”
(2)In Oechsle v. Ruhl, 140 N.J. Eq. 355, 360 (Ch. 1947), the court statedthat “[a]n act of the legislature cannot confer any right upon an individual todeprive persons of the ordinary enjoyment of their property without justcompensation. This principle rests upon the express terms of the constitutionwhich created such a prohibition.”
(3)In Pennsylvania R.R. Co. v. Angel, 41 N.J. Eq. 316 (1886), the courtstated that “[a]n act of the legislature cannot confer upon individuals orprivate corporations, acting primarily for their own profit, although forpublic benefit as well, any right to deprive persons of the ordinary enjoymentof their property, except upon condition that just compensation be first madeto the owners.”
(4)In Tide-Water Company v. Coster, 18 N.J. Eq. 518 (1866), the courtstated that “[t]he legislative power is not competent to take the property of Aand transfer it to B, simply for the benefit or convenience of B, because suchan act has no public aspect; it concerns and affects, exclusively, the twoindividuals. In such case, it would be within the authority of the judiciaryto pronounce such transfer unconstitutional and void.”
Ineach of these cases, the court reinforced the principle espoused in Article I,paragraph 20 of the New Jersey Constitution that “(i)ndividuals orprivate corporations shall not be authorized to take private property forpublic use without just compensation first made to the owners.” The taking ofthe entirety of a property owner’s equity in a parcel of real estate becausethat property owner was delinquent in the payment of property taxesattributable to the parcel of real property would appear to violate Article I,paragraph 20 of New Jersey’s Constitution as well as the Fifth Amendment of theUnited States Constitution based on the reasoning set forth in Tyler v.Hennepin County, Minnesota, et. al.. Therefore, the Legislature has theauthority, and a legal obligation to end this practice, which has becomecolloquially known and referred to as “equity theft,” and to require that anyexcess equity in a parcel of real property that has been the subject of anaction in court to foreclose the right of redemption of a tax lien be returnedto the former property owner after the lienholder has been reimbursed forproperty taxes paid, and interest due and owing, on the property during the periodin which the lienholder held the tax lien.
e. Therefore, in order toprotect the equity of every property owner who may fall behind on theirproperty taxes, whether the tax lien is held by a municipality or by a privatelienholder, the Legislature has determined that, in light of the SupremeCourt’s decision in Tyler v. Hennepin County, Minnesota, et al., the taxsale law shall be amended and supplemented in order to require that all equityremaining after a lienholder, who has foreclosed the right of redemption of atax lien, has been reimbursed for property taxes paid, plus interest, shall bereturned to the delinquent property owner.
2. (New section) a.Notwithstanding any provision of the “tax sale law,” R.S.54:5-1 et seq., or the“In Rem Tax Foreclosure Act, 1948”, P.L.1948, c.96 (C.54:5-104.29 et seq.), orany other law to the contrary, in the case of a parcel of real property that isthe subject of a foreclosure action filed in Superior Court pursuant to theprovisions of , “tax sale law,” R.S.54:5-1 et seq. or the “In Rem TaxForeclosure Act, 1948”, P.L.1948, c.96 (C.54:5-104.29 et seq.), upon theapproval of the action to foreclose the right of redemption by the court, thecourt shall not adjudge an absolute and indefeasible estate of inheritance infee simple to be vested in the purchaser. The court shall order a judicialsale of the property and shall provide for a writ of execution to the sheriffof the county in which the property is located and shall order the sheriff toconduct the judicial sale, pursuant to any direction or guidance promulgated bythe Administrative of the Office of the Courts or the Division of LocalGovernment Services in the Department of Community Affairs. The court shallfurther order that the sum of all property taxes paid by the purchaser, andinterest due thereon, together with all costs related to the filing andadjudication of the action to foreclose the right of redemption that were paidby the purchaser, shall be the first priority lien on the property, paramountto any other lien, including any outstanding municipal lien. The court shallfurther order that all costs of the judicial sale incurred by the sheriff’soffice shall be reimbursed from the proceeds of the sale. The amount receivedat the judicial sale shall be conclusively deemed to be the fair market valueof the property. In the event that there are no bidders at the judicial saleand the purchaser obtains fee title from the sheriff, the property shall bedeemed to have no equity.
b. Not later than 14 daysfollowing receipt by the sheriff of the moneys paid by the winning bidder atthe judicial sale, the sheriff shall make the following reimbursem*nts fromthese moneys in the following order as required by this section:
(1) to the purchaser, the sumof all property taxes paid, and interest due thereon, together with all costsrelated to the filing and adjudication of the action to foreclose the right ofredemption, notwithstanding any other provision of law. These costs shallinclude, but shall not be limited to, the costs associated with prejudgmentnoticing, any service and filing fees, and all reasonable attorney’s fees;
(2) to the municipality inwhich the parcel of real property is located, the amount of any other municipalliens on the property together with interest due and owing thereon;
3) to the sheriff’s office tocover the costs of the judicial sale, as required by this section; and
(4) to the defendant, allremaining moneys from the judicial sale.
c. In the event that thesheriff shall be unable to locate and forward any remaining moneys to thedefendant, these funds shall escheat to the municipality.
d. As used in this section:
“Defendant” means the owner ofa parcel of real property on which a tax sale certificate was purchased andwhose right of redemption was barred by a Superior Court judge after failing torepay the purchaser of the lien.
“Person” means any individual,proprietorship, partnership, joint venture, corporation, limited liabilitycompany, trust, association, or any other entity that has been assigned aunique federal identification number.
“Purchaser” means the personwho purchased the tax sale certificate, paid the property taxes on the parcelof real property and filed the foreclosure action with a court, and on whosebehalf the right to redeem was barred by the court.
3. R.S.54:5-32 is amended toread as follows:
54:5-32. The sale shall bemade in fee to such person as will purchase the property, subject to redemptionat the lowest rate of interest, but in no case in excess of [18%] 18 percentper annum. [Ifat the sale a person shall offer to purchase subject to redemption at a rate ofinterest less than 1%, or at no interest, he may, in lieu of any rate ofinterest to redeem, offer a premium over and above the amount of taxes,assessments or other charges, as in this chapter specified, due themunicipality, and the property shall be struck off and sold to the bidder whooffers to pay the amount of such taxes, assessments or charges, plus the highestamount of premium.]
The collector shall acceptbids in even increments and in fractional interest rate bids of 0.25 percentonly. If multiple bidders offer the same lowest rate of interest, thecollector shall use a random-number generator to select the successful bidder.If a certificate is not purchased, the certificate shall be struck off to themunicipality at the maximum rate of interest allowed by this section. Thecollector shall be entitled to a fee of five percent on the amount of thedelinquent taxes and interest when a tax sale certificate is sold, except thatthe fee shall be included in the face value of the certificate and the collectorshall not be entitled to the fee until the certificate is redeemed orpurchased.
(cf: P.L.2009, c.320, s.6)
4. R.S.54:5-86 is amended toread as follows:
54:5-86. a. When themunicipality is the purchaser of a tax sale certificate, the municipality, orits assignee or transferee, may, at any time after the expiration of the termof six months from the date of sale, institute an action to foreclose the rightof redemption. Except as provided in subsection a. of section 39 of P.L.1996,c.62 (C.55:19-58) or as provided in subsection b. of this section, for allother persons that do not acquire a tax sale certificate from a municipality,an action to foreclose the right of redemption may be instituted at any timeafter the expiration of the term of two years from the date of sale of the taxsale certificate, subject to the requirements of section 2 of P.L. , c.(C. ) (pending before the Legislature as this bill). On instituting theaction the right to redeem shall exist and continue until barred by thejudgment of the Superior Court.
b. Any person holding a taxsale certificate on a property that meets the definition of abandoned propertyas set forth in P.L.2003, c.210 (C.55:19-78 et al.), either at the time of thetax sale or thereafter, may at any time file an action with the Superior Courtin the county wherein said municipality is situate, demanding that the right ofredemption on such property be barred, pursuant to the "tax salelaw," R.S.54:5-1 et seq., or the In Rem Tax Foreclosure Act (1948),P.L.1948, c.96 (C.54:5-104.29 et seq.), subject to the requirements ofsection 2 of P.L. , c. (C. ) (pending before the Legislature as thisbill). The filing shall include a certification by the public officer orthe tax collector that the property is abandoned, provided pursuant tosubsection d. of section 6 of P.L.2003, c.210 (C.55:19-83). In the event thatthe certificate holder has unsuccessfully sought such certification from thepublic officer or tax collector, as the case may be, the certificate holder maysubmit to the court evidence that the property is abandoned, accompanied by areport and sworn statement by an individual holding appropriate licensure orprofessional qualifications, and shall provide a copy of those documentssubmitted to the court to the public officer and the tax collector. On thebasis of this submission and any submission provided by the public officer ortax collector, as the case may be, the court shall determine whether theproperty meets the definition of abandoned property.
c. Any person holding atax sale certificate on a property that meets the definition of abandonedproperty as set forth in P.L.2003, c.210 (C.55:19-78 et al.), either at thetime of the tax sale or thereafter, may enter upon that property at any timeafter written notice to the owner by certified mail return receipt requested inorder to make repairs, or abate, remove or correct any condition harmful to thepublic health, safety and welfare, or any condition that is materially reducingthe value of the property.
d. Any sums incurred oradvanced pursuant to subsection c. of this section may be added to the unpaidbalance due the holder of the tax sale certificate at the statutory interestrate for subsequent liens.
(cf: P.L.2015, c.16, s.1)
5. R.S.54:5-87 is amended toread as follows:
54:5-87. The Superior Court,in an action to foreclose the right of redemption, may give full and completerelief under this chapter, in accordance with other statutory authority of thecourt, to bar the right of redemption and to foreclose all prior or subsequentalienations and descents of the lands and encumbrances thereon, exceptsubsequent municipal liens, and to adjudge an absolute and indefeasible estateof inheritance in fee simple, to be vested in the purchaser, subject to therequirements of section 2 of P.L. , c. (C. ) (pending before the Legislatureas this bill). The judgment shall be final upon the defendants, theirheirs, devisees and personal representatives, and their or any of their heirs,devisees, executors, administrators, grantees, assigns or successors in right,title or interest and no application shall be entertained to reopen thejudgment after three months from the date thereof, and then only upon thegrounds of lack of jurisdiction or fraud in the conduct of the suit. Suchjudgment and recording thereof shall not be deemed a sale, transfer, orconveyance of title or interest to the subject property under the provisions ofthe "Uniform Voidable Transactions Act," R.S.25:2-20 et seq.
In the event that any federalstatute or regulation requires a judicial sale of the property in order todebar and foreclose a mortgage interest or any other lien held by the UnitedStates or any agency or instrumentality thereof, then the tax lien may beforeclosed in the same manner as a mortgage, and the final judgment shallprovide for the issuance of a writ of execution to the sheriff of the countywherein the property is situated and the holding of a judicial sale as in themanner of the foreclosure of a mortgage.
(cf: P.L.2021, c.92, s.23)
6. Section 4 of P.L.1948,c.96 (C.54:5-104.32) is amended to read as follows:
4. Any municipality orabandoned property certificate holder may proceed, In Rem, pursuant to theprovisions of the In Rem Tax Foreclosure Act (1948), P.L.1948, c.96(C.54:5-104.29 et seq.), similarly to bar rights of redemption, after saidcertificate has been recorded in the office of the county recording officer,subject to the requirements of section 2 of P.L. , c. (C. ) (pendingbefore the Legislature as this bill). Neither the foreclosure nor therecording of any such judgment or certificate shall be construed to be a sale,transfer, or conveyance of title or interest to the subject property under theprovisions of the "Uniform Voidable Transactions Act," R.S.25:2-20 etseq.
(cf: P.L.2021, c.92, s.25)
7. Section 2 of P.L.1964,c.39 (C.54:5-104.32a) is amended to read as follows:
2. In any case in which anymunicipality has conveyed to the State of New Jersey or a county thereof itsright, title and interest in any real property, acquired through the purchaseof any tax sale certificate covering said real property, the State or thecounty may, in the name of the municipality, foreclose the rights of redemptionof said real property from tax sales, in the name of the municipality but forthe use of the State or the county, as the case may be, under the In Rem TaxForeclosure Act, [1948] (1948),subject to the requirements of section 2 of P.L. , c. (C. ) (pendingbefore the Legislature as this bill).
(cf: P.L.1974, c.22, s.2)
8. Section 36 of P.L.1948,c.96 (C.54:5-104.64) is amended to read as follows:
36. [(a)] a.The judgment shall give full and complete relief, in accordance with theprovisions of this act, and in accordance with any other statutory authority,to bar the right of redemption, and to foreclose all prior or subsequentalienations and descents of the lands and encumbrances thereon, and to adjudgean absolute and indefeasible estate of inheritance in fee simple in the landstherein described, to be vested in the plaintiff.
[(b)] b. Such judgment shallbe binding and final upon all persons having a vested or contingent title orinterest in or lien or claim upon or against said lands, including the State ofNew Jersey, and any agency and political subdivision thereof, and their heirs,devisees and personal representatives, and their, or any of their heirs,devisees, executors, administrators, grantees, assigns or successors in right,title or interest, notwithstanding any infancy or incompetency of such personor persons, and upon all other persons, their heirs, devisees and personalrepresentatives and their or any of their heirs, devisees, executors,administrators, grantees, assigns or successors in right, title or interest.
[(c)] c. In the event thatany federal statute or regulation requires a judicial sale of the property inorder to debar and foreclose a mortgage interest or any other lien held by theUnited States or any agency or instrumentality thereof, then the tax lien maybe foreclosed in the same manner as a mortgage, and the final judgment shallprovide for the issuance of a writ of execution to the sheriff of the countywherein the property is situated and the holding of a judicial sale as in themanner of the foreclosure of a mortgage.
[(d)] d. Theprovisions of this section shall be subject to the provisions of section 2 ofP.L. , c. (C. ) (pending before the Legislature as this bill).
(cf: P.L.1995, c.326, s.3)
9. Section 17 of P.L.1997,c.99 (C.54:5-113.6) is amended to read as follows:
17. Bid specifications for acontract for the sale of the total property tax levy shall be subject to thefollowing minimum terms and conditions:
a. The municipality shallhave the right to set a minimum bid price, expressed in dollars, percent oflevy, or both, which may include a [premiumover the total property tax levy amount or a discount from the total propertytax levy amount]fee of five percent on the amount of the delinquent taxes and interest whena tax sale certificate is sold. The municipality shall reserve the rightto reject any and all bids if, in the discretion of the municipality, itdetermines that the bid sale price is inadequate.
b. The municipality shallrequire the successful bidder to secure its payment obligation with either anirrevocable letter of credit or a bond from a surety or insurance company, theform and sufficiency of which is acceptable to and approved by themunicipality, but which initially shall not be less than [105%] 105percent of the amount of the uncollected taxes levied and payable as of thelast day of the prior year or [105%] 105percent of the amount actually paid by the levy purchaser in the prior yearfor taxes levied and payable for that year, whichever is greater, or, in thecase of a levy sale concluded in the final month of the fiscal year, an amountequal to [105%] 105 percentof the actual tax collection delinquency for the prior fiscal year. The amountof the letter of credit or surety bond may be reduced proportionatelythroughout the year as the total property tax levy purchaser satisfies itspayment obligation. The irrevocable letter of credit or the bond shall beprovided prior to the sale of the total property tax levy becoming effective.
c. The purchaser shall payfor the total property tax levy bid amount in quarterly installments or, ifthere is to be one annual installment, after the last fiscal year quarterlydelinquent date as indicated in the contract for the sale of the total propertytax levy. These installments shall be due no earlier than 10 days, and nolater than 30 days after the appropriate quarterly tax due date. Whether thereis one annual installment payment prior to the end of the fiscal year asindicated in the contract for the sale of the total property tax levy orquarterly installments, in either event, the installment shall be due upon thepresentation of a certification from the tax collector stating; (1) the totalamount of the total property tax levy for the quarter or year, as appropriate,(2) the amount of property taxes that are delinquent for the quarter or year,as appropriate, (3) a list of the amount of the delinquent property taxes foreach property, which property shall be identified by block, lot and the name ofthe owner, and (4) the amount due and payable by the property tax levypurchaser pursuant to its contract with the municipality. The tax collectorshall deliver the certification to the purchaser within five business daysfollowing 10 days after the quarterly tax due date. At the time of thequarterly or annual payment, as appropriate, the purchaser shall receive as acredit against the payment due, an amount equal to the taxes paid to the taxcollector. If, within five business days of receipt of the certification fromthe tax collector, payment is not made by the total property tax levy purchaserin accordance with the contract, the municipality may charge a penalty not toexceed three times the maximum delinquent rate of interest permitted by statuteuntil such time as the required payment is made in full. The penalty interestrate shall be set forth in the bid specifications and contract.
d. Subject to the payment ofquarterly delinquent property taxes or the fiscal year delinquency by the totalproperty tax levy purchaser as specified in the contract for the sale of thetotal property tax levy, the levy purchaser shall be paid, upon collection bythe municipal tax collector, all delinquent taxes and other municipal chargesthat are owing, due and payable, subject to any contract provision pursuant tosubsection h. of this section, including interest and penalties, ifapplicable. The municipal tax collector or chief financial officer shall remitsuch funds as authorized by the governing body to the levy purchaser only uponcollection of the outstanding tax delinquencies, municipal liens or charges, orcertificate redemptions, including interest or penalties that are due and paidto the tax collector. Such funds shall be remitted by the tax collector orchief financial officer to the total tax levy purchaser within 30 days ofcollection by the tax collector unless a different schedule is specified in thecontract for the sale of the total property tax levy. Upon issuance of anappropriate tax sale certificate the total property tax levy purchaser may alsopay subsequent taxes and other municipal liens and charges, subject to anylimitations contained in the total property tax levy sale bid specificationsand contract. The total property tax levy purchaser may file an action toforeclose the right to redeem the tax sale certificate, in personam, uponexpiration of two years from the date of its issuance pursuant to R.S.54:5-86et seq.
e. The collection andenforcement of taxes and the preparation of redemption statements anddischarges of tax lien certificates shall remain the right and obligation ofthe municipal tax collector.
f. The purchaser shallprovide reports as are requested by the municipality.
g. The purchaser of the totalproperty tax levy may be obligated by the bid specifications and contract topay all subsequent taxes, municipal liens or other municipal charges on each taxsale certificate acquired under the total property tax levy purchase untilredemption or foreclosure of the tax sale certificate has been completed,whichever occurs first. The total property tax levy purchase contract mayprovide that failure to make such payments within each fiscal year shall resultin the forfeiture of any such certificate and any amount due thereon andrequire the assignment of the certificate back to the municipality. The bidspecifications and contract may include a sunset provision on provisionsrelating to the total property tax levy purchaser's right or obligation to paysubsequent taxes and other municipal liens and charges.
h. The bid specifications andcontract may contain provisions relating to the resolution of tax appeals onproperties for which the total property tax levy purchaser has acquired taxsale certificates from the municipality.
i. The bid specification andcontract may permit the municipality to conduct a public tax sale and reimbursethe total property tax levy purchaser from the proceeds of the tax sale.
j. In the event that a taxsale certificate is issued in connection with the sale of a total property taxlevy, the account of the municipality with the total property tax levypurchaser shall be credited with the total face amount of the certificate as ofthe date of its issuance.
k. The bid specifications andcontract may provide that the total property tax levy purchaser, at the closingof the levy sale, shall have the right, but not the obligation, to acquire byassignment all tax lien certificates held by the municipality, excluding thosecertificates relating to known or suspected sites of environmentalcontamination. This right of the purchaser may be exercised only if thepurchaser's bid is equal to or greater than [98%] 98 percentof the combined dollar value of the total property tax levy and the fullredemptive value of the municipal tax lien certificates so assigned.
(cf: P.L.1997, c.99, s.17)
10. R.S.54:5-33 is repealed.
11. This act shall takeeffect immediately and shall apply to any tax lien for which the right ofredemption has not been foreclosed, or final judgment rendered, as of thateffective date.
STATEMENT
This bill revises New Jersey’stax lien foreclosure laws to comply with the United States Supreme Court’sdecision in Tyler v. Hennepin County, Minnesota, et al., 143 S. Ct. 1369(2023), and the New Jersey Appellate Division court decision in 257-261 20thAvenue Realty, LLC v. Alessandro Roberto, et al., A-3315-21 (December 4,2023).
In the Tyler decision, theSupreme Court concluded that the taking of the entirety of a property owner’sequity in a parcel of real estate because that property owner was delinquent inthe payment of property taxes attributable to the parcel of real propertyviolates the Takings Clause of the Fifth Amendment to the United StatesConstitution. In the Roberto decision, the Appellate Division foundthat New Jersey’s tax sale law, which established the confiscation of aproperty owner’s equity when a tax lien on a property is foreclosed, violatesthe Takings Clause of the Fifth Amendment to the United States Constitution asdetermined in the Tyler case, and also approved the retroactiveapplication of the decision to any foreclosure case pending final judgment toaccount for the new principle of law established in Tyler (The AppellateDivision court referred to this as “pipeline retroactivity”).
In order to address the Tylerand Roberto decisions, the bill provides that notwithstanding anyprovision of the “tax sale law,” R.S.54:5-1 et seq., or the “In Rem TaxForeclosure Act, 1948”, P.L.1948, c.96 (C.54:5-104.29 et seq.), or any otherlaw to the contrary, in the case of a parcel of real property that is thesubject of a foreclosure action filed in Superior Court pursuant to theprovisions of either law, upon the approval of the action to foreclose theright of redemption by the court, the court may not award a property ownership tothe tax lien purchaser.
Instead, the court would berequired to order: (1) a judicial sale of the property to be conducted by thesheriff of the county in which the property is located, pursuant to anydirection or guidance promulgated by the Administrative Office of the Courts orthe Division of Local Government Services in the Department of CommunityAffairs; (2)that the sum of all property taxes paid by the tax lien purchaser,and interest due thereon, together with all costs related to the filing andadjudication of the action to foreclose the right of redemption that were paidby the tax lien purchaser, would be the first priority lien on the property,paramount to any other lien, including any outstanding municipal lien; and (3)that all costs of the judicial sale incurred by the sheriff’s office would bereimbursed from the proceeds of the sale. The bill also provides that the amountreceived at the judicial sale would be conclusively deemed to be the fairmarket value of the property, and in the event that there are no bidders at thejudicial sale and the purchaser obtains fee title from the sheriff, theproperty would be deemed to have no equity.
With regard to thedisbursem*nt of funds from a judicial sale of a foreclosed property, the billwould require the sheriff to make the following reimbursem*nts from thesemoneys in the following order not later than 14 days following receipt by thesheriff of the moneys paid by the winning bidder:
(1) to the purchaser, the sumof all property taxes paid, and interest due thereon, together with all costsrelated to the filing and adjudication of the action to foreclose the right ofredemption, notwithstanding any other provision of law. These costs may include,but shall not be limited to, the costs associated with prejudgment noticing,any service and filing fees, and all reasonable attorney’s fees;
(2) to the municipality inwhich the real property is located, the amount of any other municipal liens onthe property together with interest due and owing thereon;
3) to the sheriff’s office,the amounts needed to reimburse the costs of the judicial sale, and
(4) to the defendant, allremaining moneys from the judicial sale, except that if the sheriff is unableto locate and forward any remaining moneys to the defendant, those funds wouldescheat to the municipality.
The bill would also prohibitthe payment by a bidder at a tax lien sale of a premium payment to themunicipality in order to obtain a tax sale certificate, once the interest ratehas been bid down to zero. Instead, the bill would require a tax collector toaccept interest rate bids in even increments and in fractional interest rates of0.25percent only. If multiple bidders offer the same lowest rate of interest,the collector would then be required to use a random-number generator to selectthe successful bidder. If a tax sale certificate is not purchased, thecertificate would be struck off to the municipality at the maximum rate ofinterest allowed by law. The bill would entitle the collector to a fee of fivepercent of the amount of the delinquent taxes and interest when a tax salecertificate is sold, except that the fee would be included in the face value ofthe certificate, and the collector would not be entitled to the fee until thatcertificate is redeemed or purchased.
