Bill Text: NJ A3772 | 2024-2025 | Regular Session | Introduced
Bill Title: Revises process for property tax lien holder to foreclose right to redeem a property tax lien; allows property owner to protect remaining equity.
Spectrum: Bipartisan Bill
Status: (Introduced) 2024-02-22 - Introduced, Referred to Assembly State and Local Government Committee [A3772 Detail]
Download: New_Jersey-2024-A3772-Introduced.html
Sponsored by:
Assemblywoman BARBARA MCCANN STAMATO
District 31 (Hudson)
SYNOPSIS
Revises process for property tax lien holder to foreclose right to redeem property tax lien; allows property owner to protect remaining equity.
CURRENT VERSION OF TEXT
As introduced.
An Act revising the process for a property tax lien holder to foreclose the right to redeem a property tax lien, amending various parts of the statutory law, and supplementing chapter 5 of Title 54 of the Revised Statutes and P.L.1948, c.96 (C.54:5-104.29 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. R.S.54:5-33 is amended to read as follows:
54:5-33. a. Payment for the sale shall be made before the conclusion of the sale, or the property shall be resold. Any premium payment shall be held by the collector and returned to the purchaser of the fee if and when redemption is made. If redemption is not made within five years from date of sale the premium payment shall be turned over to the treasurer of the municipality and become a part of the funds of the municipality. In the event that a petition of bankruptcy has been filed by the property owner, the five year limitation shall be extended for each day that the foreclosure action is precluded by that bankruptcy filing.
b. If the tax sale certificate is redeemed through a judicial sale as in the manner of the foreclosure of a mortgage or through an Internet auction through the office of the county sheriff, and the redemption is made within five years of the date of the tax sale, the tax collector shall refund the premium to the holder of the tax sale certificate.
In the event that the holder of the tax sale certificate, or an assignee, is the successful bidder at the judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction through the office of the county sheriff, the tax collector shall not refund any premium.
(cf: P.L.2009, c.320, s.7)
2. R.S.54:5-87 is amended to read as follows:
54:5-87. a. The Superior Court, in an action to foreclose the right of redemption, may give full and complete relief under this chapter, in accordance with other statutory authority of the court, to bar the right of redemption and to foreclose all prior or subsequent alienations and descents of the lands and encumbrances thereon, except subsequent municipal liens, and to adjudge an absolute and indefeasible estate of inheritance in fee simple, to be vested in the purchaser. The judgment shall be final upon the defendants, 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 and no application shall be entertained to reopen the judgment after three months from the date thereof, and then only upon the grounds of lack of jurisdiction or fraud in the conduct of the suit. Such judgment and recording thereof shall not be deemed a sale, transfer, or conveyance of title or interest to the subject property under the provisions of the "Uniform Voidable Transactions Act," R.S.25:2-20 et seq.
b. In order to preserve any equity that may exist in the property being foreclosed, the owner, or the owner's heirs, shall have the right to demand, by written request to the Superior Court no later than 45 days after being served with the foreclosure complaint, that the holder of the tax sale certificate foreclose the right to redeem that certificate in the same manner as a mortgage, through a judicial sale as in the manner of the foreclosure of a mortgage of the property through the office of the county sheriff, or in the alternative, through an Internet auction of the property through the office of the county sheriff. The final judgment shall provide for a writ of execution to the sheriff of the county in which the property is located, and the holding of either a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction. In the event that the owner or the owner's heirs do not demand a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction, the owner of the tax sale certificate may proceed under subsection a. of this section and foreclose without a judicial sale as in the manner of the foreclosure of a mortgage, and the owner and the owner's heirs shall have no claim against the holder of the tax sale certificate for any equity in the property. The amount received through the judicial sale as in the manner of the foreclosure of a mortgage, or through the Internet auction, as appropriate, shall be conclusively presumed to be the fair market value of the property. In the event that no one bids on the property through the judicial sale as in the manner of the foreclosure of a mortgage or at the Internet auction, and the owner of the tax sale certificate obtains fee title from the sheriff, it shall be conclusively presumed that there is no equity in the property. In the event that the sheriff has not established an Internet auction, the defendant shall only be entitled to a judicial sale as in the manner of the foreclosure of a mortgage.
The sheriff of the county shall deposit with the clerk of the Superior Court any surplus funds derived from the judicial sale as in the manner of the foreclosure of a mortgage or the Internet auction, as appropriate, after the holder of the tax sale certificate has been paid the redemption moneys, allowable costs, and attorney's fees as set forth by the court in the final judgment of foreclosure. The sheriff shall deduct the costs to the office of the county sheriff of holding the judicial sale as in the manner of the foreclosure of a mortgage or Internet auction, as appropriate, have been withheld by the sheriff from those funds. All subsequent lienholders named in the foreclosure shall have the right to file a motion in the Superior Court for any surplus funds, in the order of their priority, not later than the first day of the seventh month next following the issuance of the sheriff's deed. The owner, or the owner's heirs, shall be entitled to any remaining surplus, and shall be entitled to file a motion to the court for the payment of the surplus. After five years from the date of the judicial sale as in the manner of the foreclosure of a mortgage, the clerk of the court shall pay any unclaimed monies to the holder of the tax sale certificate. If the holder of the tax sale certificate is unable to be located, the funds shall revert to the municipality wherein the property is located, and shall be paid by the clerk of the court to the chief financial officer of the municipality.
As used in this section, "surplus funds" shall mean and include any funds derived from the judicial sale as in the manner of the foreclosure of a mortgage or Internet auction through the office of the county sheriff of a property pursuant to this section, after the holder of the tax sale certificate has been fully redeemed, and paid moneys due and owing to the holder of the tax sale certificate. The redemption amount shall also include any costs charged by the sheriff to the holder of the tax sale certificate to conduct the judicial sale as in the manner of the foreclosure of a mortgage or the Internet auction.
c. In the event that any federal statute or regulation requires a judicial sale as in the manner of the foreclosure of a mortgage of the property in order to debar and foreclose a mortgage interest or any other lien held by the United States or any agency or instrumentality thereof, then the tax lien may be foreclosed in the same manner as a mortgage, and the final judgment shall provide for the issuance of a writ of execution to the sheriff of the county wherein the property is situated and the holding of a judicial sale as in the manner of the foreclosure of a mortgage.
(cf: P.L.2021, c.92, s.23)
3. Section 7 of P.L.1965, c.187 (C.54:5-97.1) is amended to read as follows:
7. [No search fee, counsel fee or other fee related to certified mailings shall be allowed a plaintiff other than a municipality in the foreclosure of a tax lien unless, prior to the filing of the complaint, the plaintiff shall have given] At least 30 [days' written notice to the parties entitled to redeem whose interests appear of record at the time of the tax sale,] days prior to the filing of a complaint, the holder of a tax sale certificate shall send all parties having a right to redeem a notice of intention to file a complaint. The notice to the owner, or the owner's heirs, shall be addressed to the last known address contained in the municipal records. The notice to any other parties having a right to redeem shall be sent to the address contained in any document recorded with the county clerk or register. The notice shall be sent by certified mail with postage prepaid thereon [, addressed to the last known address of such persons, of intention to file such complaint]. The notice shall also contain the amount [due on such] necessary to redeem the outstanding tax [lien] sale certificate [as of the date of the notice]. The notice shall also advise the owner, or the owner's heirs, that the owner, or the owner's heirs, shall have the right to request a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction of the property through the office of the county sheriff, to preserve any equity that may be in the property. A copy of [such] the notice shall also be filed with the municipal tax collector's office. [Upon the filing and service of such notice, a plaintiff shall be entitled to such fees and expenses.]
A municipality, by ordinance, may authorize the tax collector to charge to a lienholder a fee not to exceed $50 for the calculation of the amount due to redeem the tax lien required to be provided pursuant to this section. Any request for a redemption calculation shall specify the date to be used for the calculation, which shall be the date of the notice. Neither the tax collector or the municipality shall be liable for an incorrect calculation. The fee paid to the municipality shall not become part of the lien and shall not be passed on to any party entitled to redeem pursuant to R.S.54:5-54.
(cf: P.L.2009, c.320, s.11)
4. (New section) a. The holder of the tax sale certificate shall provide to the owner of the property, in writing, with the summons and complaint for foreclosure, information prominently displayed in bold face type that states that the owner of the property being foreclosed has the right to demand, in writing, that the foreclosure proceed to a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction of the property, through the office of the county sheriff.
If the holder of the tax sale certificate has complied with this subsection and the provisions of section 7 of P.L.1965, c.187 (C.54:5-97.1), that person shall be entitled to recover all reasonable attorney's fees and costs of foreclosure, including all costs associated with the judicial sale as in the manner of the foreclosure of a mortgage. In the event that all costs and reasonable attorney's fees are not recovered through the judicial sale as in the manner of the foreclosure of a mortgage or the Internet auction through the office of the county sheriff, the holder of the tax sale certificate shall have a first lien paramount to any other lien on any surplus funds and shall be entitled to apply to the Superior Court to recover any unpaid costs or attorney's fees.
b. In the event that the owner, or the owner's heirs, has demanded a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction through the office of the county sheriff, the holder of the tax sale certificate, whether a municipality or third party investor, shall be entitled to a first lien on any surplus funds that are deposited in the Superior Court by the sheriff, in the amount of 10 percent of the surplus funds, to cover administrative costs related to the foreclosure action, not to exceed $5,000.
c. As used in this section, "surplus funds" shall have the same meaning as set forth in R.S.54:5-87.
5. (New section) The notice of foreclosure required to be served on the owner and published in the newspaper shall conspicuously state in boldface type that the owner and the owner's heirs shall have the right to demand a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction through the office of the county sheriff, of the property subject to the tax lien foreclosure to preserve any equity that they may have in the property.
The notice shall state that the owner, or the owner's heirs, has 45 days from the date of service of the foreclosure complaint to file the written request for a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction through the office of the county sheriff with the Superior Court.
6. Section 31 of P.L.1948, c.96 (C.54:5-104.59) is amended to read as follows:
31. a. All costs and reasonable attorney fees incurred in [the] an in rem foreclosure action shall be equitably apportioned and allocated to the several [parcels of land affected by the action] schedules of the complaint, and added to the amount required to redeem.
b. For the purposes of this section, "all costs and reasonable attorney fees" includes all costs incurred [for a standard title search] with respect to the in rem foreclosure proceeding and all reasonable attorney fees incurred in the action, including any, and all, costs incurred for a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction through the office of the county sheriff, of the property subject to the in rem foreclosure.
In the event that the holder of the tax sale certificate shall have incurred any costs or attorney's fees in the judicial sale as in the manner of the foreclosure of a mortgage or Internet auction through the office of the county sheriff that were not reimbursed in the redemption monies received from the sheriff, the holder of the tax sale certificate shall have a first lien on any surplus funds for reimbursement of those costs and reasonable attorney's fees. As used in this section, "surplus funds" shall have the same meaning as set forth in R.S.54:5-87.
(cf: P.L.1993, c.278, s.1)
7. Section 36 of P.L.1948, c.96 (C.54:5-104.64) is amended to read as follows:
36. (a) The judgment shall give full and complete relief, in accordance with the provisions of [this act] P.L.1948, c.96 (C.54:5-104.29 et seq.), and in accordance with any other statutory authority, to bar the right of redemption, and to foreclose all prior or subsequent alienations and descents of the lands and encumbrances thereon, and to adjudge an absolute and indefeasible estate of inheritance in fee simple in the lands therein described, to be vested in the plaintiff.
(b) Such judgment shall be binding and final upon all persons having a vested or contingent title or interest in or lien or claim upon or against said lands, including the State of New 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 person or persons, and upon all other persons, 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.
In order to preserve any equity that may exist in the property being foreclosed, the owner, or the owner's heirs, shall have the right to demand, by written request to the Superior Court, no later than 45 days after being served with the foreclosure complaint, or the publication of the notice concerning the foreclosure, whichever is later, that the holder of the tax sale certificate be foreclosed with a judicial sale as in the manner of the foreclosure of a mortgage of the property through the office of the county sheriff, or, in the alternative, an Internet auction of the property through the office of the county sheriff. If there is more than one schedule in the in rem foreclosure complaint and a request is made for a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction through the office of the county sheriff, the schedule shall be severed and the final judgment shall provide for a writ of execution to the sheriff of the county where the property is located and the holding of either a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction, as appropriate.
In the event that the owner or the owner's heirs do not demand a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction through the office of the county sheriff, the holder of the tax sale certificate may proceed in rem without a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction through the office of the county sheriff, and the owner or his heirs shall have no claim against the holder of the tax sale certificate for any loss of equity in the property. The amount received at a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction through the office of the county sheriff, shall be conclusively presumed to be the fair market value of the property. In the event that no one bids at the judicial sale as in the manner of the foreclosure of a mortgage or the Internet auction through the office of the county sheriff above the amount to redeem or there is no bidding at all, it shall be conclusively presumed that there is no equity in the property.
The sheriff of the county shall deposit with the clerk of the Superior Court any surplus funds derived from the judicial sale as in the manner of the foreclosure of a mortgage or the Internet auction, after all of the costs to the office of the county sheriff of holding the judicial sale as in the manner of the foreclosure of a mortgage or the Internet auction, have been withheld by the sheriff from those funds of the sale, after paying the amount of the judgment plus any costs to the holder of the tax sale certificate. All subsequent lienholders named in the foreclosure shall have the right to apply to the Superior Court, in writing, for payment of their lien in the order of their priority. All subsequent lienholders named in the foreclosure shall have the right to apply to the Superior court for any surplus funds, in the order of their priority, not later than the first day of the seventh month next following the issuance of the sheriff's deed. The owner, or the owner's heirs, shall be entitled to any remaining surplus funds and shall be entitled to make written application to the court for the payment of the surplus. After five years from the date of the judicial sale as in the manner of the foreclosure of a mortgage, the clerk of the court shall make payment of any unclaimed monies to the holder of the tax sale certificate. If the holder of the tax sale certificate is unable to be located, the funds shall revert to the municipality wherein the property is located, and shall be paid by the clerk of the court to the chief financial officer of the municipality.
As used in this subsection, "surplus funds" shall have the same meaning as set forth in R.S.54:5-87.
(c) In the event that any federal statute or regulation requires a judicial sale as in the manner of the foreclosure of a mortgage of the property in order to debar and foreclose a mortgage interest or any other lien held by the United States or any agency or instrumentality thereof, then the tax lien may be foreclosed in the same manner as a mortgage, and the final judgment shall provide for the issuance of a writ of execution to the sheriff of the county wherein the property is situated and the holding of a judicial sale as in the manner of the foreclosure of a mortgage.
(cf: P.L.1995, c.326, s.3)
8. (New section) With respect to any property tax lien foreclosure actions pending on the date of enactment of the amendatory and supplementary provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), a property owner shall be personally served in writing with a notice of their right to demand a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction by the office of the county sheriff, and shall have 45 days after such service to notify the court of their demand for a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction by the office of the county sheriff. If the property owner demands a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction by the office of the county sheriff, in a timely manner, the foreclosure complaint shall be amended by the tax lien holder to require such a sale or auction. If no timely demand is made for a judicial sale as in the manner of the foreclosure of a mortgage or an internet auction by the office of the county sheriff, the foreclosure action shall proceed without a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction through the office of the county sheriff.
9. This act shall take effect immediately, and shall apply to any property tax lien foreclosure complaint filed on or after May 25, 2023. This act shall have no effect on any foreclosure action in which a final judgment has been entered prior to the effective date of this act.
STATEMENT
This bill would revise the "tax sale law," R.S.54:5-1 et seq., and the In Rem Tax Foreclosure Act (1948), P.L.1948, c.96 (C.54:5-104.29 et seq.), to bring those laws into compliance with the recent United States Supreme Court decision in Tyler v. Hennepin County, Minnesota, et al., 143 S. Ct. 1369 (2023) concerning the ability of a property owner, whose right to redeem a tax lien on their property has been foreclosed by the holder of a tax sale certificate, to receive any of the owner's equity remaining in the property after the tax lien foreclosure.
Under current State law, the holder of a tax sale certificate, after six months, in the case of a municipality that holds the tax sale certificate or in the case of the holder of a tax sale certificate on a property that is abandoned, or after two years, in the case of a third party lienholder, may file suit in Superior Court to foreclose the right of the property owner to redeem the tax lien. Upon the foreclosure, the lienholder will receive title to the property and all of the equity remaining in the property, leaving the former property owner with no funds from the foreclosure with which to purchase another property.
In the Tyler decision, the Supreme Court determined that Hennepin County could not keep the equity in the property beyond the amount it was owed for overdue property taxes and interest thereon. Under the Court's ruling, that excess equity was considered as property that could not be taken from the former property owner consistent with the takings clause restrictions of the 5th Amendment of the United States Constitution.
This bill would amend current law to permit a property owner to require a judicial sale as in the manner of the foreclosure of a mortgage of the property by the county sheriff in the same manner as mortgage foreclosures are subject to a judicial sale as in the manner of the foreclosure of a mortgage, or an Internet auction of the property through the office of the county sheriff. The property owner would have to make a motion to the Superior Court for either a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction of the property by the office of the county sheriff within 45 days of receiving the complaint for foreclosure or, in the case of an in rem foreclosure, within 45 days of receiving the complaint for foreclosure or the publication of the notice of foreclosure as required by law, whichever date is later. The property owner would be advised of this information, in boldface type, with the service of the complaint for foreclosure.
This bill would not require a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction of the property through the office of the county sheriff if the property owner does not make a demand for one. This would save the lien holder from incurring substantial costs associated with a judicial sale as in the manner of the foreclosure of a mortgage or Internet auction of the property through the office of the county sheriff. Many owners have no equity in their property to protect during a tax lien foreclosure. However, any property owner who wants a judicial sale as in the manner of the foreclosure of a mortgage or an Internet auction of the property through the office of the county sheriff will be able to obtain one by simply requesting one from the court.
