Tax Sale Foreclosure Primer

By statute, all municipalities in New Jersey are required to hold annual tax sales of their certificates of unpaid real estate taxes. Third parties and the municipality bid on the tax sale certificates at the sale conducted by the tax collector. At the conclusion of the sale, the highest bidder pays the outstanding taxes and becomes the holder of the certificate. The certificate must be recorded with the County Clerk to become a lien against the real estate.

For the holder of the certificate to become the owner of the property, the tax lien must be foreclosed. A holder other than the municipality must wait two years to file its foreclosure action.

The plaintiff in a tax sale foreclosure must, at least 30 days prior to filing its complaint, give written notice of its intention to foreclose as well as the amount necessary to redeem. The notice must be served on all parties whose interest in the property appears of record and who are entitled to redeem the certificate.

The amount necessary to redeem is set forth in the foreclosure complaint, which the certificate holder will serve on all interested parties named as defendants. A party wishing to redeem the certificate may do so at the municipal tax collector’s office.

All tax sale certificates and foreclosure proceedings are deemed valid unless their validity is challenged by a defendant. A defendant may file an Answer to the complaint in order to avoid losing the property by default. Typically the certificate holder will seek entry of an Order setting the time and place of redemption, which is the cutoff for a property owner or other interested party to redeem the certificate.

Failing that, the certificate holder may then apply for entry of the final foreclosure judgment. It should be noted that upon recordation of the judgment in the County Clerk’s office, the property owner and other interested parties are divested of any rights in the property, and the plaintiff becomes the owner of the property. This should be contrasted with the situation of a mortgage foreclosure where the property is scheduled for a sheriffs sale and where the winning bidder receives a sheriffs deed which is recorded. There is no sheriffs sale or sheriffs deed in a tax foreclosure usually.

We are experienced in prosecuting and defending tax foreclosures. Give us a call today!

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Charles D. Whelan III has been committed to excellence for over 30 years. With offices located centrally in New Jersey, he is able to provide businesses and individuals with excellent legal services.

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