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American Tax Funding, LLC v. Davis

A-5717-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

TAX SALES — Until a final judgment foreclosing the right of redemption is entered, a court may entertain properly filed motions by intervenors.

Three individuals were devisees of real property under a will. An entity purchased a municipal tax sale certificate on the property. Several years later, it sought to foreclose all equity in the property and sought a right of redemption under New Jersey’s tax sale law. An order setting the amount, time, and place was entered by the Chancery Division. On the last day to redeem, one of the devisees, who was also the executor of the estate, executed a contract to sell the property to a third-party and filed an application to stay the entry of final judgment of foreclosure and to allow it to intervene and redeem the property. The lower court stayed the entry of final judgment. The owner of the tax sale certificate opposed the motion, arguing that the right of redemption had expired and that the purchase price reflected only nominal consideration. The lower court granted the executor’s motion to satisfy the tax lien, redeem the property, and complete the transfer of title. The owner of the tax sale certificate appealed.

The Appellate Division affirmed, holding that the law permits a third-party investor to redeem a tax sale certificate after the filing of a foreclosure action, provided that the investor timely intervenes in the action and pays the property owner more than nominal consideration for the property. The Court found that, in the instant case, the third-party buyer had timely intervened in the action and offered more than nominal consideration. The Court also held that the balance is required to tilt toward protecting an owner’s right to the free alienation of its property. It held that by allowing intervention by the property owner up until entry of the final judgment (which cuts off the rights of the foreclosed-upon fee owner), a property owner can possibly salvage more than nominal value for its asset. It determined that issuing a stay does not harm a tax certificate holder because, when a court grants intervention and allows redemption, the certificate holder still receives the benefit of its investment, i.e. full payment, along with interest and allowed expenses. It noted that the purchase of a tax sale certificate is not the equivalent of the purchase of the underlying title as there is no guarantee that a foreclosure will ultimately result in the acquisition of title. Further, it held that the tax certificate holders could have offered to purchase the property directly from the owners, rather than take ownership through foreclosure. Therefore, the Court concluded that, until a final judgment foreclosing the right of redemption is entered, a court may entertain properly filed motions by intervenors.


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