Bulletin: NJ2024004

Dear Associates:

Please be advised that on July 10, 2024, the State of New Jersey has enacted the following bill, A3772, P.L.2024, c.39., which revises the process for tax lien holders to foreclose the right to redeem a property tax lien. This bill is to conform New Jersey tax sales law to a U.S. Supreme Court decision called Tyler v. Hennepin County that bars any state or local government from keeping home equity in excess of a taxpayer’s debts and ensures that municipalities can still foreclose on delinquent properties in accordance with the Tyler decision by the U.S. Supreme Court.

This bill shall take effect immediately and shall apply to any tax lien for which the right of redemption has not been foreclosed as of the effective date of this act, July 10, 2024. Furthermore, 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.

The bill allows the property owner or the owner's heirs to request that the foreclosure proceed through a judicial sale or internet auction through the county sheriff's office in order to preserve any equity in the property, except for properties that meet the definition of "abandoned property." Property owners are not allowed to reclaim surplus equity on abandoned properties. The bill also provides for the reimbursement of additional expenses if a homeowner or the homeowner’s heirs do not request an auction until after a tax sale certificate holder moves to foreclose on a property. Once the property is sold, the homeowner would receive their remaining equity, less their debt and costs for the county sheriff’s office that administered the sale and the tax sale certificate holder.

Specifically, for in rem tax sale actions, 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 before the date that the final judgment is entered, that the holder of the tax sale certificate foreclose the right to redeem that certificate in the same manner as a mortgage foreclosure, through a judicial sale 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. At least 30 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.

Furthermore, the bill provides that notice of foreclosure to a homeowner through publication in a newspaper shall be conspicuously stated in boldface type that the owner and the owner's heirs shall have the right to demand a judicial sale, 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. If the owner or the owner's heirs do not demand a judicial sale, or an internet auction, the owner of the tax sale certificate may foreclose without a judicial sale or an internet auction, 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.

Stewart Title Guaranty Company’s existing bulletins regarding underwriting procedures for tax sale certificates and foreclosure still apply. Additionally, when reviewing a chancery search for tax sale foreclosures, please be sure to confirm that the lien holder has complied with the notice requirements under the bill whether by personal service or by publication. If the homeowner or their heirs have demanded a judicial sale or internet auction in accordance with the bill, then you will need to confirm that the judicial sale or internet auction has taken place, before proceeding to insure the transaction.

Please consult your underwriter for further guidance regarding any questions pertaining to the compliance of the notice requirements when reviewing a chancery search for a tax sale foreclosure.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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