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MMU, LLC v. Watychowicz

A-2703-06T1 (N.J. Super. App. Div. 2008) (Unpublished)

TAX SALES; FORECLOSURE — An investor who contracts to purchase, for a nominal amount, a house under foreclosure is not entitled to reimbursement for repairs it makes to the house if the certificate holder never authorized such work and the certificate holder is not unjustly enriched.

A purchaser bought a tax certificate on a house and later initiated a foreclose action to gain title. Two days prior to the last date for the property owner to redeem the house, the house was sold by its owner to an investor for $180,000. The certificate holder filed a motion to bar the redemption by the investor on the grounds that it was nominal consideration as compared to $450,000 which was the most recent appraisal. The lower court found that the amount paid by the investor was nominal and barred the investor from redeeming the house. The lower court also imposed a constructive trust on the investor’s interest in the property.

On appeal, the Appellate Division noted that the lower court’s ruling relied on a case that was overturned but found that the investor’s attempt to redeem the tax sale certificate still was invalid because the investor had not intervened in the foreclosure proceedings, which is statutorily required for third parties that seek to acquire a property involved in a tax certificate foreclosure. It also found that the investor was not entitled to reimbursement for repairs to the house since the certificate holder never authorized any such work. It pointed out that the investor assumed the risk that it could have been barred from redeeming the property. The Court noted that the improvements made by the investor conferred a benefit on the purchaser but that the investor never established that the benefit was unjust. Based on its findings and conclusions, it affirmed the lower court’s decision to bar the investor from redeeming the house.

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