When can I start to foreclose on a tax lien?
Tax liens that are purchased at auction cannot be foreclosed for two years following the auction. If the lien is purchased from the municipality by assignment (after it was struck off to the municipality at auction) then foreclosure may be started six months after the date of the tax certificate.
How long does it take to foreclose on a tax lien?
It takes eleven months on average to complete foreclosure proceedings for a private (non-municipal) lien holder. Some files are completed faster than others due to variable factors such as (1) The number of defendants; (2) The ability to locate all defendants; (3) Whether a defendant files a contesting Answer or Bankruptcy; (4) The necessity to file special Motions to appoint a guardian ad litem for a minor; (5) Whether the FDIC holds an interest in the property; and (6) Whether an estate or heirs are involved. Files are also routinely delayed due to backlogs at the County recording office (awaiting boarding date for Lis pendens) and the Foreclosure Unit of the Court which processes all foreclosures (awaiting return of pleadings).
Municipalities may foreclose under a different statute for In Rem foreclosures which are less costly and much faster. In Rem foreclosures average just three or four months.
Most legal fee arrangements require periodic payments based on the progress of the file, so the attorney has incentive to reach the end as quickly as possible.
Why does it take so long?
The Tax Lien Law is designed with many holding periods to allow the owner and other interested parties time to raise money and redeem the tax lien. The 30-Day letter, Order Setting Time, and Default period all cause delays in the foreclosure process.
What risks do lien investors face?
Some of the risks include Bankruptcy delays; Damage or destruction of the property; Environmental contamination; Valuation of the underlying property; Foreclosure by a subsequent tax lien holder; Loss of premium if foreclosure is not completed within five years; Morality issues relating to foreclosing on someones home.
Will there be a sheriffs sale at the end of the foreclosure?
Tax lien foreclosure in New Jersey is generally a strict foreclosure process whereby the Final Judgment is recorded as a Deed and the lien holder becomes the owner without a Sheriffs Sale. There are exceptions however. If the federal government holds an interest in the property, such as an IRS federal tax lien, then strict foreclosure is not permitted, and there must be a Sheriffs Sale at the end of the foreclosure process. This opens the door to other investors who may bid at the sale to pay off the plaintiff / tax lien holder, and take title to the property via Sheriffs Deed.
When a Sheriff Sale occurs, you do not get the property, but you get paid off with interest. Also, pursuant to the change in the tax sale law, an owner has the right to raise the affirmative defense of surplus equity and demand a sheriff sale.
Do I have to keep paying taxes on the property after I buy a tax lien?
It is advisable to keep paying subsequent taxes but it is not always necessary. If you do not pay the subsequent taxes, then the taxes will become a lien that has priority over your lien. Eventually you will either have to pay it off, or you will be foreclosed. Also, the Court will not issue a Final Judgment unless all open taxes are paid by someone – either the owner or another lien holder.
Can I stop subsequent tax lien holders from foreclosing on me?
Subsequent (newer) tax liens have priority over prior (older) tax liens. The holder of a prior tax lien can pay off the subsequent lien and have the cost added to its tax lien. The only limitation on this rule is that anyone who acquires an interest in property for a nominal consideration is not permitted to redeem subsequent tax liens. This is designed to stop title raiders and their hunters.
Who may redeem my tax lien?
N.J.S.A. 54:5-54 limits the right of redemption to only the owner, his heirs, holder of any prior outstanding tax lien certificate, mortgagee, or occupant. Other interests such as judgments, condominium liens, subsequent tax liens, and construction liens do not create any right to redeem a tax lien.
How does redemption take place?
The redeeming party must obtain a redemption figure (including any recoverable costs and legal fees) from the tax collector and deliver the money to the tax collector. The collector then contacts the tax lien holder and delivers a voucher confirming the redemption figure. The lien holder then confirms that the figure is correct, signs the back of the Tax Sale Certificate for cancellation, and delivers it to the tax collector. The collector then delivers the redemption money to the lien holder, and cancels the lien from the public records.
How do I go about paying subsequent taxes?
The tax collector will calculate the amount due and you must pay the subsequent taxes to the tax collector. Most towns calculate the amount due for free, but Paterson and Jersey City often charge a fee. It is important that you prepare and file an AAffidavit of Subsequent Tax Payment so that the money paid for subsequent taxes will be added to your tax lien. If you just pay off taxes without filing an Affidavit with the Tax Collector, the amount you pay will not be added to your lien. The tax collector will sign it, and of course, you must keep a copy of the Affidavit for your records.