Each year, more than 1,000 properties in New Jersey proceed through tax sale foreclosure. Many property owners lose significant surplus equity because the New Jersey Tax Sale Law provides no method to preserve their surplus equity. Once a Final Judgment is entered in a tax foreclosure, the Plaintiff owns your property, and you lose all of your equity. The New Jersey Courts then require a property owner to file a motion to vacate the Final Judgment to try to save their equity.
In 2023, the United States Supreme Court, in the case of Tyler v. Hennepin Cnty., held that the local government’s retention of the excess value of the home above the plaintiff’s tax debt in a tax foreclosure was plausibly alleged as a violation of the Takings Clause of the U.S. Constitution.
Currently, in New Jersey, there are no Sheriff Sales for tax foreclosure, unless the federal government has a lien on the underlying property. However, the laws in New Jersey will be changing to help protect property owners from losing title to their properties and the surplus equity. However, it will require the property owner to alert the Court that there is equity in the property.
IF YOU OWE PROPERTY TAXES AND THERE IS EQUITY IN THE PROPERTY, YOU MUST RESPOND TO FORECLOSURE DOCUMENTS TO TELL THE COURT THAT THERE IS EQUITY AND YOU DO NOT WANT TO LOSE TITLE TO YOUR PROPERTY.
Even if the property is in foreclosure, a property owner has the right to sell the property to pay the taxes and keep the equity.
If there is equity in the property and the Court is notified, the property should go to sheriff sale, where investors can bid on the property. If the successful bidder pays more than the amount of taxes owed, it can create “Surplus Funds.” The property owner or their heirs may be entitled to these funds and can make an application to the Court to get the ”Surplus Funds.”
If you have questions about defending a tax foreclosure, saving your equity, or obtaining Surplus Funds after a Sheriff Sale, contact Ira J. Metrick, Esq. today.
