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Simon v. Rando

374 N.J. Super. 147, 863 a.2d 1078 (App. Div. 2005)

TAX SALES; REDEMPTION—Where one acquires an interest in a delinquent property by assignment after a tax sale complaint has been filed, the acquirer must apply to the court to become a party to the proceeding before having any redemption right.

A holder acquired a tax-sale certificate and moved to foreclose the right to redeem after the requisite two-year waiting period had expired. Default was entered against the original property owners, and an order was issued. It set the required redemption amount and established the final date by which the owner could redeem. Less than one week before the final date for redemption, an intervenor purchased an earlier tax-sale certificate. Its assignment reflected consideration of $1. The intervenor then contacted the holder and offered to purchase the holder’s tax-sale certificate for $2,500. The holder said “no” because the property’s value was between $225,000, and $245,000. One day after the final date for redemption, without having made an appearance in the foreclosure action, the intervenor redeemed the property. On the same day, the court entered final judgment in favor of the holder. The intervenor then moved to intervene in the foreclosure action and to vacate the holder’s final judgment. The lower court granted the motion and directed the tax collector to process the intervenor’s redemption.

The purpose of the Tax Sale Law is to enhance tax collection. Wide public participation in a public sale furthers this purpose. Intrusion after the commencement of a foreclosure action thwarts that purpose. Through the foreclosing holder’s efforts to identify and serve those who hold a redeemable interest, a would-be-intruder is able to readily identify a person who has a right to redeem but who has no intention of exercising it. Such persons are likely willing to accept an intruder’s offer to purchase the interest, and an assignment of the interest puts the intruder in a position to redeem and cut off the certificate holder’s right to foreclose. According to the Court, if such practices were allowed, no one would purchase at tax sales. For that reason, after a foreclosure complaint is filed, the right to redeem is limited. N.J.S.A. 54:5-98 provides for judicial oversight of redemption by limiting the right to redeem a tax sales certificate to persons who are parties to the foreclosure action.

Where one acquires an interest in a delinquent property by assignment after a complaint is filed, the Tax Sale Law imposes additional procedural requirements. A person with an unrecorded assignment of an interest may record the assignment and apply to be made a party to the action. Without such an application, the person is bound by the proceedings as if he or she had been made a party to, and appeared in, the foreclosure action, and the judgment had been made against him or her as one of the defendants. If the assignee does not apply to be made a party, it cannot redeem the certificate.

The Appellate Division pointed out that this particular intervenor was aware of the foreclosure action when it acquired its interest in the property and had purchased a prior tax-sale certificate from the owner after the complaint to foreclose had been filed. It also pointed out that the intervenor did not apply to be made a party in the action before redeeming the certificate. According to the Court, one who acquires an interest in a property after a tax sale complaint is filed and is not named in the order of redemption is barred from redeeming the certificate through the tax collector. For that reason, the Court reversed the lower court’s decision, and remanded for entry of judgment of foreclosure in favor of the holder, subject to such payments to the intervenor that the intervenor could show were made directly to the holders of the prior tax-sale certificates and to the tax collectors.

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