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Legislative Advocacy

Posted on: December 8, 2023

Court Rules NJ Tax Sale Foreclosure Violates Constitution

This week, a NJ appellate panel issued a published decision that will have a sweeping impact on New Jersey’s Tax Sale Law and will undoubtedly result in legislative action. 

In 257-261 20th Avenue Realty, LLC v. Alessandro Roberto the court found that the framework of New Jersey’s Tax Sale Law (TSL), establishing confiscation of a property owner’s equity when said property is foreclosed, violates the Fifth Amendment’s Taking Clause.  

The panel likened New Jersey’s TSL to that of Minnesota’s which was examined by the U.S. Supreme Court in Tyler v. Hennepin County, where the Supreme Court found that a county foreclosing upon then selling a property and keeping profits beyond what was owed in local fees and taxes violated the Constitution.  

The panel was not convinced by the foreclosing tax certificate holder’s argument that Tyler did not apply to a private entity. 

The decision goes on to conclude that retroactive application of the Tyler decision is inappropriate because it establishes a new principal of law and retroactive application would be unworkable, creating a hardship for taxing authorities and third-party purchasers. Meaning that foreclosures that have already been finalized would not be affected by this ruling and Tyler

The court, however, did find that “pipeline retroactivity” is appropriate. This means that any foreclosure case pending final judgement would need to account for the new principle of law found in Tyler.       

The League, at the invitation of the court, appeared as amicus curiae, to address what effect, if any, Tyler has on the matter.  

The League is currently reviewing several bills that are aimed at addressing the Tyler ruling. We anticipate the legislature to act shortly to address this issue. The League seeks to ensure that any efforts to amend the state’s TSL account for the ability to maintain marketability of tax sale certificates, to maintain needed cashflow for municipalities, and to return properties to the paying tax rolls. 

Contact: Frank Marshall, Esq., Associate General Counsel, fmarshall@njlm.org, 609-695-3481, x137. 

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