Bill Text: NJ A1035 | 2024-2025 | Regular Session | Introduced
Bill Title: Protects equity accrued by property owner in tax sale foreclosure.
Spectrum: Partisan Bill (Republican 4-0)
Status: (Introduced) 2024-01-09 - Introduced, Referred to Assembly Housing Committee [A1035 Detail]
Download: New_Jersey-2024-A1035-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Assemblywoman NANCY F. MUNOZ
District 21 (Middlesex, Morris, Somerset and Union)
Assemblyman ANTWAN L. MCCLELLAN
District 1 (Atlantic, Cape May and Cumberland)
Assemblyman ALEX SAUICKIE
District 12 (Burlington, Middlesex, Monmouth and Ocean)
SYNOPSIS
Protects equity accrued by property owner in tax sale foreclosure.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act concerning actions to foreclose the right to redeem a tax sale certificate, amending R.S.54:5-86 and R.S.54:5-87, and supplementing chapter 5 of Title 54 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. R.S.54:5-86 is amended to read as follows:
54:5-86. a. When the municipality is the purchaser of a tax sale certificate, the municipality, or its assignee or transferee, may, at any time after the expiration of the term of six months from the date of sale, institute an action to foreclose the right of 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 all other 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 time after the expiration of the term of two years from the date of sale of the tax sale certificate, subject to the requirements of section 3 of P.L. , c, (C. ) (pending before the Legislature as this bill). On instituting the action the right to redeem shall exist and continue until barred by the judgment of the Superior Court.
b. Any person holding a tax sale certificate on a property that meets the definition of abandoned property as set forth in P.L.2003, c.210 (C.55:19-78 et al.), either at the time of the tax sale or thereafter, may at any time file an action with the Superior Court in the county wherein said municipality is situate, demanding that the right of redemption on such property be barred, pursuant to 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.). The filing shall include a certification by the public officer or the tax collector that the property is abandoned, provided pursuant to subsection d. of section 6 of P.L.2003, c.210 (C.55:19-83). In the event that the certificate holder has unsuccessfully sought such certification from the public officer or tax collector, as the case may be, the certificate holder may submit to the court evidence that the property is abandoned, accompanied by a report and sworn statement by an individual holding appropriate licensure or professional qualifications, and shall provide a copy of those documents submitted to the court to the public officer and the tax collector. On the basis of this submission and any submission provided by the public officer or tax collector, as the case may be, the court shall determine whether the property meets the definition of abandoned property.
c. Any person holding a tax sale certificate on a property that meets the definition of abandoned property as set forth in P.L.2003, c.210 (C.55:19-78 et al.), either at the time of the tax sale or thereafter, may enter upon that property at any time after written notice to the owner by certified mail return receipt requested in order to make repairs, or abate, remove or correct any condition harmful to the public health, safety and welfare, or any condition that is materially reducing the value of the property.
d. Any sums incurred or advanced pursuant to subsection c. of this section may be added to the unpaid balance due the holder of the tax sale certificate at the statutory interest rate for subsequent liens.
(cf: P.L.2015, c.16, s.1)
2. R.S.54:5-87 is amended to read as follows:
54:5-87. 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, except as provided in, and subject to the provisions of, section 3 of P.L. , c, , (C. ) (pending before the Legislature as this bill). 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.
In the event that any federal statute or regulation requires a judicial sale 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. (New section) a. As used in this section:
"Defendant" means the owner of a parcel of real property for which a tax sale certificate was purchased and whose right of redemption was barred by a Superior Court judge after failing to repay the purchaser of the lien.
"Purchaser" means the person who purchased the tax sale certificate, paid the property taxes on the parcel of real property and filed the foreclosure action with a court, and on whose behalf the right to redeem was barred by the court.
b. Notwithstanding any provision of the "tax sale law," R.S.54:5-1 et seq., or the "In Rem Tax Foreclosure Act," P.L.1948, c.96 (C.54:5-104.29 et seq.), or any other law to the contrary, in the case of a parcel of real property that is the subject of a foreclosure action filed in Superior Court pursuant to the provisions of R.S.54:5-86, upon the approval of the action to foreclose the right of redemption by the court, the court shall not adjudge an absolute and indefeasible estate of inheritance in fee simple to be vested in the purchaser. Instead, the Superior Court shall order that the sum of all property taxes paid by the purchaser, and interest due thereon, together with all costs related to the filing and adjudication of the action to foreclose the right of redemption that were paid by the purchaser, shall be the first priority lien on the property, paramount to any other lien, including any outstanding municipal lien, and shall order the sheriff of the county in which the parcel of real property is located to hold an Internet auction of the property, pursuant to any direction or guidance promulgated by the Administrative Office of the Courts or the Division of Local Government Services in the Department of Community Affairs. The order shall require that all costs of the auction incurred by the sheriff's office shall be reimbursed from the proceeds of the auction.
c. Not later than 14 days following receipt by the sheriff of the moneys paid by the winning bidder at the auction, the sheriff shall make the following reimbursements from these moneys:
(1) To the purchaser, the sum of all property taxes paid, and interest due thereon, together with all costs related to the filing and adjudication of the action to foreclose the right of redemption; and
(2) To the municipality in which the parcel of real property is located, the amount of any other municipal liens on the property together with interest due and owing thereon.
d. The sheriff shall retain for the sheriff's office sufficient funds to cover the costs of the auction, as required in this section. Once these payments have been made, the sheriff shall then forward any remaining moneys to the defendant.
4. This act shall take effect immediately.
STATEMENT
This bill would revise the process governing an action filed in
Superior Court by the holder of a tax lien on certain parcels of real property when that person institutes an action to foreclose the right of redemption of the tax lien. The right of redemption of a tax lien is the right of the owner of the property on which the tax lien exists to pay the holder of the tax lien and remove the lien from the property.
Currently, under R.S.54:5-86, for persons who do not acquire a tax sale certificate from a municipality, an action to foreclose the right of redemption may be instituted at any time after the expiration of the term of two years from the date of sale of the tax sale certificate. Once an action to foreclose the right to redeem has been filed by a tax lien holder, the right to redeem continues to exist until barred by the judgment of the Superior Court. However, upon the action by the judge to bar the right of redemption and foreclose all liens other than municipal liens, the judge grants the holder of the tax sale certificate the title to the property, and that person becomes the owner of the property. At this point, the previous owner's rights to the property are permanently extinguished and the previous owner also loses any value, commonly referred to as equity, built up in the property through appreciation, or the payoff of a mortgage. For a property taxpayer who has paid down a mortgage, who has equity in a property, or whose property has considerably appreciated over time, the loss of the property in a tax lien foreclosure, and all of the equity in the property as well, could lead to homelessness or other hardship, as there are no funds with which to rent, or to purchase, another property.
The provisions of this bill are intended to address the unfairness of the loss of that equity to property owners who lose property in a tax lien foreclosure.
Under the bill, in the case of a parcel of real property that is the subject of a tax lien foreclosure action filed in Superior Court, upon the approval of the action to foreclose the right of redemption by the Court, the Court would not grant the plaintiff (the tax lien holder) ownership of the property. Instead, the Court would order that all of the property taxes paid by the plaintiff, and interest due thereon, together with all costs related to the filing and adjudication of the action to foreclose the right of redemption that were paid by the plaintiff, would be the first priority lien on the property, paramount to any other lien, including any outstanding municipal lien, and would order the sheriff of the county in which the parcel of real property is located to hold an Internet auction of the property.
Once the Internet auction is over and the property has been sold, not later than 14 days following receipt by the sheriff of the moneys paid by the winning bidder at the auction, the sheriff must forward to the tax lien holder plaintiff the sum of all property taxes paid by the plaintiff, and interest due thereon, together with all costs related to the filing and adjudication of the action to foreclose the right of redemption. The sheriff must also pay to the municipality the amount of any other municipal liens on the property plus any interest due and owing thereon, and retain for the sheriff's office sufficient funds to cover the costs of the auction.
Once those payments are made, the sheriff would then forward any remaining moneys collected from the winning bidder of the auction to the defendant. This allows the defendant to retain funds to either purchase, or rent, another property.
Property equity is a valuable asset to property owners that should be retained by the property owners. It provides a property owner with opportunities to turn the equity to cash to purchase or rent another property, or to pay for items like living expenses in retirement, a child's college savings, or the health care of a loved one.
Equity theft happens when government uses the property to settle an unpaid tax debt and allow someone other than the property owner collect the excess revenue.
Like other assets, home equity should be protected from unjust government seizure. The State is part of a small number of states that do not provide property owners the remaining equity following a tax sale foreclosure.
