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Real Estate Tax Foreclosure – Does a Tax Sale Certificate Holder Have an Indefinite Time Period to File Foreclosure?

NJ Real Estate AttorneysThe idea for this post came from a recent client inquiry that we received about filing a tax foreclosure suit on behalf of an individual who has held a tax sale certificate for approximately 27 years against the home of her deceased parents, and paid the real estate taxes during all 27 years.

Every New Jersey municipality is authorized by statute to conduct public tax sales due to the non-payment of real estate taxes by the property owner.   The municipality will issue a tax sale certificate to the purchaser, who then must pay the real estate taxes for a minimum of 2 consecutive years as a condition precedent to filing suit to foreclose the lien. The property owner has a limited amount of time to pay or “redeem” the tax sale certificate. In the absence of a timely redemption, the tax sale certificate holder will obtain title to the property upon receiving a final judgment in foreclosure.

In this particular situation, the tax sale holder claims to have paid the taxes for 27 consecutive years but did not file a foreclosure suit.  An unusual situation to say the least. The first question that comes to mind is whether New Jersey has a statute of limitations that requires a tax sale certificate holder to file a foreclosure suit or be deemed to have lost the right to do so?  The answer is yes, but there is an exception as I will explain below.

N.J.S.A. 54:5-79 provides a 20 year limitations period for a tax sale certificate holder to commence a foreclosure suit.  However, the statute has an important exception that avoids application of the 20 year limitations period; namely, if the purchaser or his/her heirs or assigns establishes that all of the taxes have been paid since the certificate was originally purchased.  In other words, a tax certificate holder who pays the taxes for more than 20 years dating back to the inception of ownership of the tax sale certificate will not be barred from filing a foreclosure suit after the 20 year period has lapsed.

Full text of N.J.S.A. 54:5-79

The title of a purchaser at a sale shall cease and determine and the certificate of sale except as otherwise provided in this section shall be void at the expiration of 20 years from the date of the sale, unless the purchaser, his heirs or assigns shall, before the expiration of that term, foreclose the right to redeem it by notice or by a civil action in the nature of a proceeding in equity and record the evidence thereof, as provided in this chapter; provided, however, that this act shall not apply to titles acquired by a municipality under certificates of tax sales purchased and held by it at tax sales conducted therein which titles so acquired and certificates of tax sales are hereby expressly exempted from said limitation period of 20 years. The limitation period of 20 years of this section shall not apply to a title and the certificate of tax sale acquired by a purchaser, his heirs or assigns when that purchaser, his heirs or assigns establish that all property taxes have been paid by him, his heirs or assigns in each year since the purchase of the certificate.

In Schnitzer v. Rinderer, 17 N.J. Tax 136  (Tax Ct. 1998), aff’d, 318 N.J. Super. 322 (App.Div. 1999), the Appellate Division confirmed that N.J.S.A. 54:5-79 authorizes the filing of a tax lien foreclosure beyond 20 years when the holder has paid all of the taxes since acquiring the tax sale certificate. In this particular case, the tax sale certificate was purchased in 1969 but the foreclosure was not filed until 1994.  Since all of the taxes were continually paid during this 25 year period, the foreclosure suit was not time barred.

Admitted to NJ Bar in 1990, NY Bar in 1991. Former Judicial Law Clerk to Honorable Peter Ciolino, Assignment Judge, Superior Court of New Jersey, Bergen County. Member & Barrister: Daniel J. Moore Bankruptcy Inn of Court Member & Barrister: Morris Pashman Inn of Court Member: Bergen County Bar Association NJ Superlawyer - 2008, 2009, 2010, 2011, 2012, 2013 Nominated for inclusion in Best Lawyers of America Member: Litigation Counsel of America, Trial Lawyer Honorary Society
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