Deborah Feldstein is a tax attorney with the Denville, NJ firm Pellegrino and Feldstein. She and her partner, Michael Pellegrino, were pioneers in the tax lien world almost 24 years ago and authored a book titled “Tax Liens, The Complete Guide to Investing in Tax Liens in New Jersey.” Her specialty is NJ tax lien foreclosures, and she has an uncommon depth of knowledge, experience, and expertise.
The Biggest Way NJ Differs from Other States
The most significant way that New Jersey is different from other states is that it only collects taxes at the municipal level. There are 565 cities that hold these sales, typically once or twice a year – which makes the Garden State one of the largest tax sale states in the nation. The sale must be publicly advertised in five public places and published no fewer than four times, in the newspaper that is circulated in the same municipality where the property is located.
Interest and Premiums
New Jersey is a tax lien state, with the potential for an 18% interest rate – although it is also a bid down state. If the rate is bid down to zero, then a premium is bid on the property, and those premiums are held and returned to you if a redemption is made. However, if a redemption has not been made within five years, the premium is kept by the city. That makes it critical that the lienholder initiate the foreclosure early enough to trigger the redemption, to ensure they don’t lose their premium when it reverts back to the municipality. Then there’s no chance for refund, even if you redeem the lien. Keep in mind that initiating the foreclosure can take time, especially if the courts are backlogged. That’s why Feldstein urges lienholders with a premium involved to avoid procrastinating, and start the process as early as possible.
The purchased tax certificate must be recorded within three months of the date of the sale, and the lien is held for two years before a foreclosure can be instituted. In that case, Feldstein recommends filing a notice of intent to foreclose about 30 days before the two-year date is reached. Notifications of foreclosure are typically the costliest and most time-consuming part of the process. They can take many months to complete, to ensure the court that you’ve exhausted all possibilities of notification of any and all potential defendants. The whole process usually takes about a year, from the start of foreclosure to completion and taking ownership of the property. Of course, each property is different, so that timeline may be a few months shorter or longer, depending on the details of the particular foreclosure.
There are two types of foreclosure proceeding in NJ, namely In Personam (against the property owner for the financial deficit) and In Rem (the judgement is only against the property). Most title companies in the state are reluctant to ensure tax lien foreclosures right away, which is another factor to consider in terms of timelines. In NJ, older liens can also redeem newer liens, so when performing due diligence to figure out which liens to buy, Feldstein strongly recommends finding out which ones have priority. Regarding recent statutory changes in the state, the only one Feldstein cites – which is a huge change beneficial for tax sale investors – is that more and more sales are moving to online, versus in person.
For More Information
As is true in any jurisdiction, the tax certificate process involves many more important details and legal nuances – including those involving what your options and expectations may be if there is a bankruptcy that impacts the tax certificate. To learn more about how tax certification works in New Jersey, check out the complete video interview with Feldstein and the comprehensive statutory review. You can also learn more about the details concerning tax lien investments in New Jersey by reading her comprehensive white paper, and find out all about NJ bankruptcies by referring to the white paper by expert Robert Keyser of Taylor & Keyser and watching his in-depth interview.