Bill Text: NJ A3968 | 2024-2025 | Regular Session | Introduced
Bill Title: Revises tax lien foreclosure process to protect equity accrued by property owner in tax lien foreclosure.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced) 2024-03-04 - Introduced, Referred to Assembly State and Local Government Committee [A3968 Detail]
Download: New_Jersey-2024-A3968-Introduced.html
Sponsored by:
Assemblywoman YVONNE LOPEZ
District 19 (Middlesex)
Assemblywoman BARBARA MCCANN STAMATO
District 31 (Hudson)
SYNOPSIS
Revises tax lien foreclosure process to protect equity accrued by property owner in tax lien foreclosure.
CURRENT VERSION OF TEXT
As introduced.
An Act revising the tax lien foreclosure process, revising various parts of the statutory law, 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. (New section) The Legislature finds and declares that:
a. On May 25, 2023, the United 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 very important implications for the rights of all property owners, and specifically, New Jersey law governing property taxes on real property.
Ms. Geraldine Tyler owned a condominium in Hennepin County, Minnesota on which accumulated approximately $15,000 in unpaid real estate taxes, interest, and penalties. The county seized the condominium and sold it for $40,000. Instead of returning the excess $25,000 from the sale to Ms. Tyler, the county kept the money for itself as permitted by that state's law. Ms. Tyler filed suit, alleging that the county unconstitutionally retained the excess value of her condominium beyond the $15,000 tax debt in violation of the Takings Clause of the Fifth Amendment to the United States Constitution, as well as the Excessive Fines Clause of the Eighth Amendment. In an opinion written by Chief Justice Roberts for a unanimous Court, the Court found that Ms. Tyler had plausibly alleged a taking under the Fifth Amendment. Since Ms. Tyler agreed that relief under the Takings Clause would fully remedy her harm, the Court did not decide whether she also alleged an excessive fine under the Eighth Amendment. However, the acknowledgement that Ms. Tyler had plausibly alleged a taking under the Fifth Amendment has the effect of limiting what a lienholder can collect when a court forecloses the right of redemption of a lien on the lienholder's behalf to only the property taxes paid by the lienholder, plus interest. In the words of Chief Justice Roberts, "(t)he taxpayer must render unto Caesar what is Caesar's, but no more." In this case, the party that kept the excess funds was a public entity, not a private lienholder.
On December 4, 2023, the New Jersey Appellate Division court issued its decision in 257-261 20th Avenue Realty, LLC v. Alessandro Roberto, et al., finding that New Jersey's tax sale law, which established the confiscation of a property owner's equity when a tax lien on a property is foreclosed, violates the Takings Clause of the Fifth Amendment to the United States Constitution as determined in the Tyler case, and also approved the retroactive application of the decision to any foreclosure case pending final judgment to account for the new principle of law established in Tyler (The Appellate Division court referred to this as "pipeline retroactivity").
b. New Jersey's "tax sale law," R.S.54:5-1 et seq., allows the holder of a tax sale certificate, whether it is a municipality or a private lienholder, the ability to foreclose the right of the property owner to redeem the lien by paying to the tax sale certificate holder all of the property taxes, plus interest, that the holder of the tax sale certificate paid to the municipality. Under R.S.54:5-86, an action to foreclose the right of redemption of a tax lien is filed with the Superior Court. Under R.S.54:5-87, as part of the action to foreclose the right of redemption, the court has the authority to "adjudge an absolute and indefeasible estate of inheritance in fee simple, to be vested in the purchaser." In other words, the Superior Court is authorized to grant title of the property to the lienholder, without requiring the lienholder to return the excess equity in the property to the prior owner. This authority applies to both municipalities, as lienholders, as well as to private lienholders. The language of R.S.54:5-85 reinforces this authority of the Superior Court: "[t]he provisions of this article shall be liberally construed as remedial legislation to encourage the barring of the right of redemption by actions in the Superior Court to the end that marketable titles may thereby be secured."
c. The New Jersey Constitution expressly extends property rights protections to actions taken by private parties. Article I, paragraph 20 of the constitution provides that private property shall not be taken for public use without just compensation. That paragraph goes on to provide that "(i)ndividuals or private corporations shall not be authorized to take private property for public use without just compensation first made to the owners."
d. Case law reinforces the provisions of Article I, paragraph 20.
(1) In Hyde v. Somerset Air 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 upon individuals or private corporations, acting primarily for their own profit, although for public benefit as well, any right to deprive persons of the lawful enjoyment of their property."
(2) In Oechsle v. Ruhl, 140 N.J. Eq. 355, 360 (Ch. 1947), the court stated that "[a]n act of the legislature cannot confer any right upon an individual to deprive persons of the ordinary enjoyment of their property without just compensation. This principle rests upon the express terms of the constitution which created such a prohibition."
(3) In Pennsylvania R.R. Co. v. Angel, 41 N.J. Eq. 316 (1886), the court stated that "[a]n act of the legislature cannot confer upon individuals or private corporations, acting primarily for their own profit, although for public benefit as well, any right to deprive persons of the ordinary enjoyment of their property, except upon condition that just compensation be first made to the owners."
(4) In Tide-Water Company v. Coster, 18 N.J. Eq. 518 (1866), the court stated that "[t]he legislative power is not competent to take the property of A and transfer it to B, simply for the benefit or convenience of B, because such an act has no public aspect; it concerns and affects, exclusively, the two individuals. In such case, it would be within the authority of the judiciary to pronounce such transfer unconstitutional and void."
In each of these cases, the court reinforced the principle espoused in Article I, paragraph 20 of the New Jersey Constitution that "(i)ndividuals or private corporations shall not be authorized to take private property for public use without just compensation first made to the owners." The taking of the entirety of a property owner's equity in a parcel of real estate because that property owner was delinquent in the payment of property taxes attributable 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 the United States Constitution based on the reasoning set forth in Tyler v. Hennepin County, Minnesota, et. al.. Therefore, the Legislature has the authority, and a legal obligation to end this practice, which has become colloquially known and referred to as "equity theft," and to require that any excess equity in a parcel of real property that has been the subject of an action in court to foreclose the right of redemption of a tax lien be returned to the former property owner after the lienholder has been reimbursed for property taxes paid, and interest due and owing, on the property during the period in which the lienholder held the tax lien.
e. Therefore, in order to protect the equity of every property owner who may fall behind on their property taxes, whether the tax lien is held by a municipality or by a private lienholder, the Legislature has determined that, in light of the Supreme Court's decision in Tyler v. Hennepin County, Minnesota, et al., the tax sale law shall be amended and supplemented in order to require that all equity remaining after a lienholder, who has foreclosed the right of redemption of a tax lien, has been reimbursed for property taxes paid, plus interest, shall be returned 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.), 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 , "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.), 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. The court shall order a judicial sale of the property and shall provide for a writ of execution to the sheriff of the county in which the property is located and shall order the sheriff to conduct the judicial sale, pursuant to any direction or guidance promulgated by the Administrative of the Office of the Courts or the Division of Local Government Services in the Department of Community Affairs. The court shall further 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. The court shall further order that all costs of the judicial sale incurred by the sheriff's office shall be reimbursed from the proceeds of the sale. The amount received at the judicial sale shall be conclusively deemed to be the fair market value of the property. In the event that there are no bidders at the judicial sale and the purchaser obtains fee title from the sheriff, the property shall be deemed to have no equity.
b. Not later than 14 days following receipt by the sheriff of the moneys paid by the winning bidder at the judicial sale, the sheriff shall make the following reimbursements from these moneys in the following order as required by this section:
(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, notwithstanding any other provision of law. These costs shall 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 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;
3) to the sheriff's office to cover the costs of the judicial sale, as required by this section; and
(4) to the defendant, all remaining moneys from the judicial sale.
c. In the event that the sheriff shall be unable to locate and forward any remaining moneys to the defendant, these funds shall escheat to the municipality.
d. As used in this section:
"Defendant" means the owner of a parcel of real property on 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.
"Person" means any individual, proprietorship, partnership, joint venture, corporation, limited liability company, trust, association, or any other entity that has been assigned a unique federal identification number.
"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.
3. R.S.54:5-32 is amended to read as follows:
54:5-32. The sale shall be made in fee to such person as will purchase the property, subject to redemption at the lowest rate of interest, but in no case in excess of [18%] 18 percent per annum. [If at the sale a person shall offer to purchase subject to redemption at a rate of interest less than 1%, or at no interest, he may, in lieu of any rate of interest to redeem, offer a premium over and above the amount of taxes, assessments or other charges, as in this chapter specified, due the municipality, and the property shall be struck off and sold to the bidder who offers to pay the amount of such taxes, assessments or charges, plus the highest amount of premium.]
The collector shall accept bids in even increments and in fractional interest rate bids of 0.25 percent only. If multiple bidders offer the same lowest rate of interest, the collector shall use a random-number generator to select the successful bidder. If a certificate is not purchased, the certificate shall be struck off to the municipality at the maximum rate of interest allowed by this section. The collector shall be entitled to a fee of five percent on the amount of the delinquent taxes and interest when a tax sale certificate is sold, except that the fee shall be included in the face value of the certificate and the collector shall not be entitled to the fee until the certificate is redeemed or purchased.
(cf: P.L.2009, c.320, s.6)
4. 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 2 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.), subject to the requirements of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill). 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)
5. 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, subject to the requirements of section 2 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)
6. Section 4 of P.L.1948, c.96 (C.54:5-104.32) is amended to read as follows:
4. Any municipality or abandoned property certificate holder may proceed, In Rem, pursuant to the provisions 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 said certificate has been recorded in the office of the county recording officer, subject to the requirements of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill). Neither the foreclosure nor the recording 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 the provisions of the "Uniform Voidable Transactions Act," R.S.25:2-20 et seq.
(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 any municipality has conveyed to the State of New Jersey or a county thereof its right, title and interest in any real property, acquired through the purchase of any tax sale certificate covering said real property, the State or the county may, in the name of the municipality, foreclose the rights of redemption of said real property from tax sales, in the name of the municipality but for the use of the State or the county, as the case may be, under the In Rem Tax Foreclosure Act, [1948] (1948), subject to the requirements of section 2 of P.L. , c. (C. ) (pending before 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 the provisions of this act, 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)] 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.
[(c)] c. 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.
[(d)] d. The provisions of this section shall be subject to the provisions of section 2 of P.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 a contract for the sale of the total property tax levy shall be subject to the following minimum terms and conditions:
a. The municipality shall have the right to set a minimum bid price, expressed in dollars, percent of levy, or both, which may include a [premium over the total property tax levy amount or a discount from the total property tax levy amount] fee of five percent on the amount of the delinquent taxes and interest when a tax sale certificate is sold. The municipality shall reserve the right to reject any and all bids if, in the discretion of the municipality, it determines that the bid sale price is inadequate.
b. The municipality shall require the successful bidder to secure its payment obligation with either an irrevocable letter of credit or a bond from a surety or insurance company, the form and sufficiency of which is acceptable to and approved by the municipality, but which initially shall not be less than [105%] 105 percent of the amount of the uncollected taxes levied and payable as of the last day of the prior year or [105%] 105 percent of the amount actually paid by the levy purchaser in the prior year for taxes levied and payable for that year, whichever is greater, or, in the case of a levy sale concluded in the final month of the fiscal year, an amount equal to [105%] 105 percent of the actual tax collection delinquency for the prior fiscal year. The amount of the letter of credit or surety bond may be reduced proportionately throughout the year as the total property tax levy purchaser satisfies its payment obligation. The irrevocable letter of credit or the bond shall be provided prior to the sale of the total property tax levy becoming effective.
c. The purchaser shall pay for the total property tax levy bid amount in quarterly installments or, if there is to be one annual installment, after the last fiscal year quarterly delinquent date as indicated in the contract for the sale of the total property tax levy. These installments shall be due no earlier than 10 days, and no later than 30 days after the appropriate quarterly tax due date. Whether there is one annual installment payment prior to the end of the fiscal year as indicated in the contract for the sale of the total property tax levy or quarterly installments, in either event, the installment shall be due upon the presentation of a certification from the tax collector stating; (1) the total amount 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 for each property, which property shall be identified by block, lot and the name of the owner, and (4) the amount due and payable by the property tax levy purchaser pursuant to its contract with the municipality. The tax collector shall deliver the certification to the purchaser within five business days following 10 days after the quarterly tax due date. At the time of the quarterly or annual payment, as appropriate, the purchaser shall receive as a credit against the payment due, an amount equal to the taxes paid to the tax collector. If, within five business days of receipt of the certification from the tax collector, payment is not made by the total property tax levy purchaser in accordance with the contract, the municipality may charge a penalty not to exceed three times the maximum delinquent rate of interest permitted by statute until such time as the required payment is made in full. The penalty interest rate shall be set forth in the bid specifications and contract.
d. Subject to the payment of quarterly delinquent property taxes or the fiscal year delinquency by the total property tax levy purchaser as specified in the contract for the sale of the total property tax levy, the levy purchaser shall be paid, upon collection by the municipal tax collector, all delinquent taxes and other municipal charges that are owing, due and payable, subject to any contract provision pursuant to subsection h. of this section, including interest and penalties, if applicable. The municipal tax collector or chief financial officer shall remit such funds as authorized by the governing body to the levy purchaser only upon collection of the outstanding tax delinquencies, municipal liens or charges, or certificate redemptions, including interest or penalties that are due and paid to the tax collector. Such funds shall be remitted by the tax collector or chief financial officer to the total tax levy purchaser within 30 days of collection by the tax collector unless a different schedule is specified in the contract for the sale of the total property tax levy. Upon issuance of an appropriate tax sale certificate the total property tax levy purchaser may also pay subsequent taxes and other municipal liens and charges, subject to any limitations contained in the total property tax levy sale bid specifications and contract. The total property tax levy purchaser may file an action to foreclose the right to redeem the tax sale certificate, in personam, upon expiration of two years from the date of its issuance pursuant to R.S.54:5-86 et seq.
e. The collection and enforcement of taxes and the preparation of redemption statements and discharges of tax lien certificates shall remain the right and obligation of the municipal tax collector.
f. The purchaser shall provide reports as are requested by the municipality.
g. The purchaser of the total property tax levy may be obligated by the bid specifications and contract to pay all subsequent taxes, municipal liens or other municipal charges on each tax sale certificate acquired under the total property tax levy purchase until redemption or foreclosure of the tax sale certificate has been completed, whichever occurs first. The total property tax levy purchase contract may provide that failure to make such payments within each fiscal year shall result in the forfeiture of any such certificate and any amount due thereon and require the assignment of the certificate back to the municipality. The bid specifications and contract may include a sunset provision on provisions relating to the total property tax levy purchaser's right or obligation to pay subsequent taxes and other municipal liens and charges.
h. The bid specifications and contract may contain provisions relating to the resolution of tax appeals on properties for which the total property tax levy purchaser has acquired tax sale certificates from the municipality.
i. The bid specification and contract may permit the municipality to conduct a public tax sale and reimburse the total property tax levy purchaser from the proceeds of the tax sale.
j. In the event that a tax sale certificate is issued in connection with the sale of a total property tax levy, the account of the municipality with the total property tax levy purchaser shall be credited with the total face amount of the certificate as of the date of its issuance.
k. The bid specifications and contract may provide that the total property tax levy purchaser, at the closing of the levy sale, shall have the right, but not the obligation, to acquire by assignment all tax lien certificates held by the municipality, excluding those certificates relating to known or suspected sites of environmental contamination. This right of the purchaser may be exercised only if the purchaser's bid is equal to or greater than [98%] 98 percent of the combined dollar value of the total property tax levy and the full redemptive 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 take effect immediately and shall apply to any tax lien for which the right of redemption has not been foreclosed, or final judgment rendered, as of that effective date.
STATEMENT
This bill revises New Jersey's tax lien foreclosure laws to comply with the United States Supreme Court's decision in Tyler v. Hennepin County, Minnesota, et al., 143 S. Ct. 1369 (2023), and the New Jersey Appellate Division court decision in 257-261 20th Avenue Realty, LLC v. Alessandro Roberto, et al., A-3315-21 (December 4, 2023).
In the Tyler decision, the Supreme Court concluded that the taking of the entirety of a property owner's equity in a parcel of real estate because that property owner was delinquent in the payment of property taxes attributable to the parcel of real property violates the Takings Clause of the Fifth Amendment to the United States Constitution. In the Roberto decision, the Appellate Division found that New Jersey's tax sale law, which established the confiscation of a property owner's equity when a tax lien on a property is foreclosed, violates the Takings Clause of the Fifth Amendment to the United States Constitution as determined in the Tyler case, and also approved the retroactive application of the decision to any foreclosure case pending final judgment to account for the new principle of law established in Tyler (The Appellate Division court referred to this as "pipeline retroactivity").
In order to address the Tyler and Roberto decisions, the bill provides that 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.), 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 either law, upon the approval of the action to foreclose the right of redemption by the court, the court may not award a property ownership to the tax lien purchaser.
Instead, the court would be required to order: (1) a judicial sale of the property to be conducted by the sheriff of the county in which the property is located, 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; (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 and adjudication of the action to foreclose the right of redemption that were paid by 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 be reimbursed from the proceeds of the sale. The bill also provides that the amount received at the judicial sale would be conclusively deemed to be the fair market value of the property, and in the event that there are no bidders at the judicial sale and the purchaser obtains fee title from the sheriff, the property would be deemed to have no equity.
With regard to the disbursement of funds from a judicial sale of a foreclosed property, the bill would require the sheriff to make the following reimbursements from these moneys in the following order not later than 14 days following receipt by the sheriff of the moneys paid by the winning bidder:
(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, 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 in which the real property is located, the amount of any other municipal liens on the 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, all remaining moneys from the judicial sale, except that if the sheriff is unable to locate and forward any remaining moneys to the defendant, those funds would escheat to the municipality.
The bill would also prohibit the payment by a bidder at a tax lien sale of a premium payment to the municipality in order to obtain a tax sale certificate, once the interest rate has been bid down to zero. Instead, the bill would require a tax collector to accept interest rate bids in even increments and in fractional interest rates of 0.25percent only. If multiple bidders offer the same lowest rate of interest, the collector would then be required to use a random-number generator to select the successful bidder. If a tax sale certificate is not purchased, the certificate would be struck off to the municipality at the maximum rate of interest allowed by law. The bill would entitle the collector to a fee of five percent of the amount of the delinquent taxes and interest when a tax sale certificate is sold, except that the fee would be included in the face value of the certificate, and the collector would not be entitled to the fee until that certificate is redeemed or purchased.
