Bill > S1425

Introduced Session

This bill would revise the process governing an action filed in Superior Court by the holder of a tax lien on a parcel of real property when that person institutes an action to foreclose the right of redemption of the tax lien. This bill is necessary because the United States Supreme Court's holding in Tyler v. Hennepin County, Minnesota, et al., 143 S. Ct. 1369 (2023), has undermined the provision of New Jersey's tax sale law which awards the holder of a tax sale certificate the ability to foreclose the property owner's right to redeem the tax lien and awards the holder of the tax sale certificate the property itself, as well as all of the property owner's equity in the property. The right of redemption of a tax lien is the right of the owner of the property on which the tax lien exists to repay the holder of the tax lien for the amount of taxes paid by the lienholder, plus interest, and remove the lien from the 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. 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. 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 Fifth 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 the 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. Currently, under R.S.54:5-86, with respect to a lienholder that is not 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. In the case of a municipality that holds a tax certificate, an action may be filed at any time after 6 months from the date of the tax lien sale. 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 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 tax lien holder ownership of the property. Instead, the Court would order that all of the property taxes paid by the tax lien holder, 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 holder, 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 completed 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 would be required to forward to the tax lien holder the sum of all property taxes paid by the tax lien holder, 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 would be required to 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. Under current law, with respect to 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, as well as the loss of all of the equity in the property, could lead to homelessness or other hardship, as there are no funds returned to the property owner with which to rent, or to purchase, another property. Property equity is a valuable asset to property owners that should be protected, and 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," as this practice is known colloquially, occurs when government uses the property to settle an unpaid property tax debt and allow someone other than the property owner to collect the excess revenue beyond the unpaid property tax debt. Like other assets, home equity should be protected from unjust government seizure. New Jersey is one of a handful of states, plus the District of Columbia, that does not currently, following a tax lien foreclosure, return to a property owner the remaining equity in the property subject to the tax lien foreclosure.

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Joe Cryan (D)*,  Teresa Ruiz (D)*, 

Introduced in the Senate, Referred to Senate Budget and Appropriations Committee (on 01/13/2026)

Official Document