Tax Lien Foreclosure


At LoFaro & Reiser, our lawyers have extensive experience representing property owners and tax sale investors in the specialized area of real estate tax foreclosures involving the enforcement of property tax sale certificates for residential and commercial properties throughout New Jersey.

Tax Lien Certificates arise from a municipality's sale unpaid tax liens. The purchaser of a tax lien essentially steps into the shoes of the municipality and can, subject to the satisfaction of certain conditions, enforce the tax lien by commencing a foreclosure suit against the property owner and any other persons or entities holding junior liens. Tax lien foreclosures are governed by statute in New Jersey.

New Jersey gives tax sale purchasers special lien priority. In fact, the general rule in New Jersey for tax lien priority is the first filed document has the greater right. Thus, a previously recorded mortgage has priority over subsequent liens recorded against the property with one critical exception – when a tax lien certificate is filed the tax lien becomes superior to all other liens.

Most states require a lengthy wait from the purchase of the tax lien certificate to the right to foreclose. In New Jersey, the waiting period is two (2) years for private investors. During this 2-year period and during the foreclosure case the investor must pay all the property taxes assessed by the municipality or otherwise subsequent tax sale certificate purchasers will leapfrog ahead of them. Thus, tax certificate liens holders must be prepared to tie their money up for an extended period of time.

Some FAQ's

What is the effect of a tax sale judgment entered in the Superior Court of New Jersey, Chancery Division?

N.J.S.A. 54:5-104.64 answers this question. The entire text of the statute is repeated verbatim as follows:

(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) 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) 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.

Once a judgment is entered in a tax foreclosure lawsuit, can the property owner still redeem the tax lien under state law?

No. Unlike a regular mortgage foreclosure case, in tax foreclosure cases the property owner loses title to the property once a final judgment is entered.

N.J.S.A. 54:5-105 states:

When in a judgment in an action to foreclose the right of redemption, the lands are described in a manner other than that contained in the certificate of tax sale, the judgment shall bar the defendant’s right of redemption in and to all the lands described in the judgment, and that property only. 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 Fraudulent Transfer Act.”

In several instances our firm has successfully recovered title to properties lost by homeowners due to a tax foreclosure judgment. Indeed, in situations involving tax sale foreclosures where the homeowner has lost substantial equity in the property, such as where no mortgage exists, there are published decisions in New Jersey that disfavor allowing a tax sale investor to walk away with a major  windfall.  By the same token, persuading a Court to vacate a tax foreclosure judgment is no easy task and the property owner must have the ability to pay the tax lien redemption amount in lump sum.

Our experienced tax foreclosure team is here to help. For urgent tax sale foreclosures please call us at 201-498-0400. Otherwise, for routine inquiries please complete our online contact form.

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