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Kanter v. The Township of Rockaway

369 N.J. Super. 473, 849 A.2d 578 (App. Div. 2004)

TAX SALES; PUBLIC BIDDING—When a municipality sells a property taken back for failure to pay taxes, it may take into consideration whether a bidder intends to occupy or improve the property being sold.

A municipality purchased its own tax sale certificate for unpaid municipal liens. The property had been used as a gasoline service station and an automobile repair shop. It contained leaking underground storage tanks which had contaminated the underlying soil. The municipality sought bids on the purchase of the property. Notices to bid were published and posted. One individual bid $2,500, promising that he would clean-up and rehabilitate the site in a timely and professional manner. The municipality published the bid in the local paper and announced its intention to accept additional higher bids at the next township council meeting. At that meeting, another individual submitted a written bid for $3,550, and stated that he wanted to build a medical or dental office on the property. Then a bidding war ensued. A final bid of $17,510 was submitted by the second bidder. By reason of this unexpected interest in the property, the municipality elected to reject all bids so that it could evaluate its options.

The municipality then authorized another private sale, pursuant to N.J.S.A. 54:5-114.2(b), setting a $20,000 minimum bid. The first bidder submitted a written bid of $20,000, which again included his personal statement indicating his plans for the property. At the next council meeting, the second bidder verbally bid $22,500. However, the municipality rejected this bid and accepted the first bidder’s bid. The council found that it was in the municipality’s best interest to sell the property to the first bidder because his written statement of intentions conformed with the council’s objectives for the property in a timely manner.

The second bidder sued to prevent the sale of the certificate. The lower court held that N.J.S.A. 54:5-114.2(b) specifically allows a municipality to reject a higher bid. The law gives multiple options to a municipality when accepting or rejecting bids. On appeal, the second bidder contended that the municipality’s assignment of the certificate to the lower bidder at the public auction was contrary to N.J.S.A. 54:5-114.2(b), and was arbitrary and capricious. It also claimed that the tax sale certificate should have been assigned to it as the highest bidder at the auction. The Appellate Division disagreed. The statute specifically allows a governing body to accept or reject the high bid. There is no requirement in the statute that the municipality must accept the highest bid. The Court held that the Legislature’s objective was to grant wide discretion to governing bodies, including the power to take into consideration whether a bidder intends to occupy or improve the property being sold. Some bidders may be preferred if they promise a better potential for returning property to the tax rolls or for increasing the property’s assessed value.

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