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Laufgas v. City of Paterson

A-1513-02T5 (N.J. Super. App. Div. 2004) (Unpublished)

TAX LIENS—A bona fide purchaser of a property can take a property free of tax liens if the municipality fails to issue a tax search certificate within fifteen days after request, but a request for a redemption statement is not the same as a request for a tax search certificate and it is proper for a municipality to challenge whether a claimant is actually a bona fide purchaser.

An owner failed to pay property taxes for a number of years. As a result, several tax lien certificates were sold to one buyer. For the next four years, the property owner failed to pay the further taxes and penalties. During this time the owner wrote to the municipality requesting a tax lien redemption statement. She claimed that no statement was sent. Thereafter, her son claimed to have bought the property. A defective and non-recordable deed was prepared. No mortgage was ever recorded. The family’s objective in filing suit was to take the property free of the tax liens by virtue of N.J.S.A. 54:5-18. That statute states that a person purchasing a property, for which the municipality had failed to issue a tax search certificate within fifteen days after its request, can hold the land free from any liens.

The lower court dismissed the claim because the owner had requested a tax lien redemption statement, and not a tax search certificate. The Appellate Division affirmed. It also held that the son, as purchaser, lacked standing because he was not the one who made the request. His mother had. It also held that no rational fact finder could find that the son was a bona fide purchaser who relied on the municipality’s alleged failure. Further, he could not have believed there were no tax liens against his mother’s property.

After the suit concluded, the tax sale certificate holder filed a complaint seeking to foreclose. In response, the son cross-moved against the municipality, claiming improprieties by the municipality’s tax collector in failing to provide his mother with the requested tax lien redemption worksheets. The lower court held that the mother could not assert that defense because she had not requested a tax search certificate and because the statute did not protect property owners but protected bona fide investors seeking to purchase property. In addition, the lower court held that the son was precluded from asserting this defense in the first place because the statute did not protect investors who are aware of existing tax liens. It also ordered the certificate holder to provide the owner with tax lien redemption statements indicating the pay-off amount.

The son then filed another complaint, contending that “after becoming a bona fide purchaser” of his mother’s property, he requested a tax search certificate from the municipality and he never received one. He alleged that, instead, the municipality sent his mother a letter advising her that the fee was twenty-five dollars for each of the four redemption certificates. His suit sought to invalidate the certificates under N.J.S.A. 54:5-18. The lower court dismissed the complaint and held, once again, that the son was aware of the liens before he requested the tax search. The court also held that the son had not yet taken title to the property. Therefore, at most, he would only be entitled to an order directing the municipality to issue the tax search certificates.

On appeal, the Appellate Division also held that the son was not a bona fide purchaser. There was no evidence that the property sale ever rook place. In fact, the son’s suit referred to his mother as the “owner,” and alleged that the certificate holder had bought the tax liens. The Court found that this defeated his self-proclaimed status as a bona fide purchaser, since he clearly had notice of the liens before any sale. Consequently, he could not have been relying on the alleged failure of the municipality to issue him a tax search certificate.

Finally, the Court held that the action was barred by the doctrine of collateral estoppel. The issues had already been litigated. The previous action had concluded that no rational fact finder could conclude that the son was a bona fide purchaser who had relied on the municipality’s alleged failure to issue a tax search certificate. Furthermore, it had already been held that N.J.S.A. 54:5-18 does not protect an investor who is aware of an existing tax lien.


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