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Robinhood Properties, LLC v. NJ TLC Holdings

A-3311-08T3 (N.J. Super. App. Div. 2011) (Unpublished)

TAX SALES; FORECLOSURE — Because a property remains encumbered until the earlier of redemption or foreclosure of a tax sales certificate, a third party who pays all of the taxes before that date confers the benefit on all owners of an interest in the property and is entitled to proportionate repayment.

The purchaser of a tax lien certificate paid the property taxes for almost three years before filing a complaint to foreclose the tax sale certificate. Title to the property had been held by six persons as tenants in common. Prior to filing suit, the tax lien certificate purchaser accepted a deed in lieu of foreclosure for two undivided one-third interests in the property. Two months after filing suit, it assigned its rights to a company in the business of buying tax liens. The remaining property owner had not settled with the tax lien certificate purchaser, but conveyed his one-third share of the property to an investor. The sale was contingent on the investor’s successful intervention in the pending foreclosure action. The court granted the investor’s motion to intervene, finding that the $35,000 it paid to the remaining original owner was more than nominal consideration. The investor acquired the last one-third share of the property after intervention, and redeemed the lien on the property.

The investor then sued for partition and sought contribution from the owner of the other two thirds interest for a proportionate share of the redemption of the tax sale certificate encumbering the property. The lower court ordered the certificate holder and its successor in interest to contribute two-thirds of the redemption amount. It said that each co-tenant is entitled to contribution from the other co-tenant for payments made to preserve the property. The court said that when the redemption amount was paid, it worked to protect all owners of the property.

On appeal, the Appellate Division affirmed, finding that the property remained encumbered until the earlier of redemption or foreclosure of the certificate, and therefore the investor who paid all the taxes conferred a benefit on all owners of an interest in the property. The redemption of a tax lien certificate protects all owners’ interests from foreclosure. The Court held that allowing a party who acquires a minor share of a property to receive contribution from other owners in the property following the redemption of a tax lien certificate favors fair treatment to the person who holds a minor interest in property. According to the Court, the prospect of contribution would increase the number and amount of offers for the minority interest.

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