What is a Tax Sale?
Information from the New Jersey League of Municipalities and the State of New Jersey
A tax sale is the sale of property to collect payment of delinquent tax or other Municipal Charges. This is inclusive of Taxes, interest, costs of sale, water, sewer, electric, Assessments for Improvements, demolitions, board ups, etc. New Jersey law requires all municipalities to hold at least one tax sale per year, if the municipality has delinquent property taxes and/or municipal charges.
The tax sale is a public auction and is held at the time and place as noticed by the municipality. At the tax sale, title to the delinquent property itself is not sold. What is sold is a tax sale certificate, a lien on the property. Each property is sold as advertised or for the amount still remaining unpaid. Liens can be sold for less than advertised but NEVER MORE unless the sale was adjourned to a new date (day to day, week to week, up to 8 weeks). Bids begin at the maximum rate of interest 18% and is bid down. Bids that reach 0% then go to premium bids, which are monetary amounts paid in addition to the delinquent amount being sold. The winning bidder is the one who bids the lowest percentage of interest or bids the highest premium. At the close of the sale, the winning bidder must immediately pay (pursuant to the local restrictions) the municipality the taxes and interest to date; in exchange the municipality will provide the bidder the tax sale certificate. In order for the winning lien holder to protect their interest in the tax sale certificate, it should be recorded in the Deed Room at the County Clerk’s Office within 90 days of the sale.
Taxes continue to accrue on the property after the sale of the certificate. Bidders have the option to pay these subsequent taxes; if they are not paid, a tax sale certificate will be sold at the next tax sale. Any subsequent certificate issued will be paramount to any prior certificate. Subsequent taxes paid by the lien holder earn interest at the rate set by the municipality. If the certificate is redeemed by the property owner prior to foreclosure, the certificate earns a redemption penalty at the rate of 2, 4, or 6 percent, depending on the amount of the original tax sale certificate, in addition to any interest rate on the certificate. After two years, a lien holder can begin proceedings in Superior Court to foreclose on the property. If foreclosure is perfected, then the name on the deed is changed to that of the lien holder who can then take possession of the property
In such cases where there are NO BIDDERS, the lien is struck off to the municipality at the highest interest rate of 18%. All future taxes automatically accrue to the lien. NO payments can be accepted until the lien is redeemed in full, inclusive of ALL current charges and interest. Additional ENFORCEMENT can be taken, including foreclosure & receivership.
The Tax Sale is not complete until ALL payments have been received by the collector. If a successful bidder does not make payment; the property is resold.