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Garden State Land Company v. The City of Vineland

368 N.J. Super. 369, 846 A.2d 625 (App. Div. 2004)

TAX SALES CERTIFICATES; LIENS; FORECLOSURE; NOTICE—A tax sales certificate holder is a “party in interest” and is entitled to receive notice that a municipality intends to place a demolition lien on the affected property or has sued for foreclosure of that lien.

A company bought two tax sale certificates for a dilapidated property. The municipality had issued a complaint to the property owner concerning its condition, and notified the owner of an upcoming hearing regarding its fitness for occupancy. The owner neither responded nor appeared at the hearing. Therefore, the municipality issued an order requiring repair of the premises. If construction permits were not obtained by an established date, demolition would be required. Once again, the owner did not respond, leading the municipality to file a complaint seeking a demolition order. The order was granted. Demolition took place, but the municipality was unable to sell the demolition lien, and as a result, it kept it.

Meanwhile, the holder of the tax sale certificates had been paying the property’s taxes and obtained a judgment of foreclosure. It filed a quiet title action, and sought a declaration that the municipality’s demolition lien was invalid for failure to provide it, the certificate holder, with notice of the initial administrative hearing. The municipality argued that the holder was not a necessary party and was not entitled to notice or service of process. The municipality filed an answer and counterclaim, seeking an order declaring its demolition lien valid and giving it priority. It also argued that because the structures were not only unfit, but also unsafe, it could have demolished them on an emergent basis, without notice to anyone. It also argued that if the demolition lien was invalid, it was entitled to reimbursement for the costs of demolition to avoid unjust enrichment to the certificate holder.

The municipality produced an affidavit of its tax collector, stating that prior to authorizing the demolition, he had multiple conversations with the holder’s principal where it was made clear that the municipality intended to demolish the property. The affidavit also stated that the holder never objected. The tax certificate holder presented an opposing certification on the matter, stating that it had never received written notice of the demolition proceedings, but not denying it had received oral notice.

The lower court held that the certificate holder was a party in interest entitled to formal notice of the demolition proceedings and that the situation was not so emergent as to authorize demolition without notice. Therefore, it held that the demolition lien was invalid.

The Appellate Division affirmed. Once a determination to demolish is made, notice designating a hearing date and location must be given to the property owner and to all parties in interest. “Parties in interest” means any person or entity with an interest of record in the property. The municipality claimed that this only applied to parties in possession of the premises. The Court disagreed. The purpose of the statute is to provide adequate advance notice to any party having a readily ascertainable interest as an owner, occupant or interest holder of record. Such parties should be given the opportunity to contest the charge of unfitness or to make necessary repairs.

The Court also disagreed that N.J.S.A. 40:48-1.1 allows an unfit but non-dangerous structure to be demolished without notice. And, the Court held that the assertion that this was not an emergency was supported by the facts because about a year passed between the initial inspection report and the actual demolition. Further, the statute does not create a separate statutory scheme for demolition proceedings. It only provides an additional remedy in some cases where, in addition to imposing a lien for the cost of demolition, the municipality may also enforce payment against the property owner.

The Court rejected the municipality’s unjust enrichment claim. That argument assumed that the certificate holder reaped the benefits, at the public’s expense, of the increased value of the property as a result of the demolition, which the holder allegedly knew in advance and did nothing to stop. However, the municipality did not demolish the structures for the benefit of the holder, but rather to preserve the health of its inhabitants under general police powers. The municipality’s statutory remedy is limited to a lien against the property. Finally, the municipality was claiming that the holder lacked a sufficient interest to be entitled to notice but if that were true, the municipality would have no reason to expect that the holder would pay for the demolition.

Even if there were some scenario in which an unjust enrichment claim could exist, the Appellate Division determined that the lower court’s remedy enabled the municipality to preclude the holder from any such gains. If the municipality wished to preserve the demolition lien, it would be required to reimburse the holder for the amount of the underlying liens which were foreclosed, together with statutory interest and any taxes paid. Similarly, if the municipality wished to obtain title, it would be required to reimburse the holder for actual out-of-pocket expenses, and in exchange the holder could convey the title.


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