Bulletin: NJ2024003

Dear Associates:

This bulletin updates and supplements our existing Bulletin NJ2011002.

In May of 2023, the Supreme Court issued a decision in Tyler v. Hennepin County, 598 U.S. 631 (2023). In a nutshell, the Supreme Court held that the holder of a tax sale certificate is not entitled to any excess equity the owner may have in the property. This applies to both in personam and in rem procedures. In the Tyler case, Hennepin County of Minnesota sold Ms. Tyler’s home for $40,000 to satisfy a $15,000 tax bill. However, the county retained the excess $25,000. Ms. Tyler filed suit to determine whether this was a taking of property without just compensation. The Supreme Court affirmed that it was. Consequently, the county was not entitled to keep the excess $25,000. New Jersey has a similar tax sale foreclosure procedure as Minnesota and therefore is equally affected.

The State of New Jersey has now built off the Tyler decision with its own recent case, 257-261 20th Avenue Realty, LLC v. Roberto 2023 (App. Div. 2023). In the Roberto case, the NJ Appellate Court also ruled similarly as the U.S. Supreme Court that the taking of the excess equity was unconstitutional. It also stated that the Tyler decision had “pipeline retroactivity” and applied to cases where a final judgment had not been rendered at the time Tyler was decided. Finally, the NJ Appellate Court also addressed the applicability of a motion under New Jersey Court Rule 4:50-1(f). The court ruled that the taking of the equity was an abuse of discretion and effectively stated that this rule may apply indefinitely. As of the time of writing this bulletin, the New Jersey Supreme Court may still hear this case on appeal, but it is not guaranteed.

As a result of these two cases, there were also several bills introduced in both the NJ Senate and Assembly that would protect any excess equity an owner may have in a property after a tax sale foreclosure. However, none of the bills have passed either house at this time.

These recent developments have caused our underwriting considerations for insuring title out of a tax sale foreclosure to be modified, at least until further notice. Effective immediately, all agents must include the following exception:

Consequences of the exercise of the right of redemption for a period of three months from the recording of the final judgment in the office of the county recording officer, pursuant to N.J.S.A. 54:5-104.67, or reopening or vacating of the final judgment pursuant to N.J. Ct. R. 4:50.

Please note that this is a change from historical underwriting practices that only excepted for a reopening or vacating of the final judgment pursuant to Rule 4:50 for only one year. Until further notice, you must include the exception without the “one year” language.

Stewart Title Guaranty Company will continue to monitor this situation and provide updates regarding any pending cases and legislation. We will adjust any underwriting practices accordingly.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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