Bulletin: NJ2023006

Dear Associates:

This bulletin supplements Stewart bulletin NJ2011002 and is an update to NJ’s Tax Foreclosure practice.

On July 12, 2023, the New Jersey Supreme Court issued an Order in response to a recent decision of the United States Supreme Court. That US Supreme Court decision, Tyler v Hennepin County, 598 U.S. ____, 143 S. Ct. 1369 (2023), concerned a homeowner who owed $15,000 in back real property taxes. Pursuant to Minnesota law, the County seized the property and sold it for $40,000.00, then kept the balance of $25,000.00 for its own purposes. The homeowner sued the County, alleging that keeping the additional $25,000 was a “taking” without just compensation under the US Constitution. The Supreme Court agreed.

While the Minnesota process is different than the NJ In Rem Foreclosure process, the similarities are the potential loss of equity by the homeowner, and the retention of surplus funds by the municipality. These similarities prompted the NJ Supreme Court to issue its order, stating that In Rem tax foreclosure actions filed after May 25, 2023, will require a motion for final judgment made to the county Superior Court judge, rather than having the entry of final judgment handled by the Foreclosure Unit.

The Order also specifies that any allegation in a responsive pleading that a party has equity in the property shall be treated as a contesting answer to the tax foreclosure.

Additionally, the Order sets forth changes in the requirements for service for In Rem actions, requiring personal service of any and all parties who have the right of redemption. This requirement for personal service includes the summons and complaint as well as all prejudgment notices and the notice of motion for entry of judgment. This is a departure from the current Court Rules which allow for publication and mailed notice of the publication to the owner and interested parties.

As result of this change, when a chancery abstracts for an In Rem tax foreclosure is being reviewed, note the filing date of the complaint. If it is filed after May 25, 2023, you must verify that all notices including the original summons and complaint and the motion for entry of judgment are all served personally upon the parties who hold a right of redemption. Note that the Order does allow for the possibility of alternate service in the event that the owner cannot be served personally, by filing a certificate of diligent inquiry with the court, detailing the steps that were taken to locate and serve the defendant owner.

This Order may result in additional or supplemental orders to clarify the new procedures, or litigation testing the new procedures. We will keep you apprised as any new developments evolve.

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