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Wachovia Cust. for Plymouth Park Tax Service, L.L.C. v. Pitts

A-5236-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

TAX SALES; INTERVENORS — A third-party may redeem a tax sales certificate after the filing of a foreclosure action so long as the third-party timely intervenes in the action and pays the property owner more than nominal consideration for the property.

An investor purchased a tax sale certificate and then paid the property taxes as they became due. The investor initiated a tax foreclosure action. Prior to the entry of a judgment of foreclosure, a company contracted with the landowner to buy property. The agreement was that the company would pay all outstanding liens and judgments and then title would be transferred the company. Following the transfer, the company would list the property for sale with an independent real estate broker for fair market value. Until a sale, the seller would be permitted to remain in the home rent-free. Upon a sale, the company would be reimbursed for its costs to clear title, and then receive 35% of the sale proceeds, with the original owner receiving 65%. The company moved to intervene in the foreclosure action, asking for the right to redeem the tax sale certificate.

The lower court allowed the intervention, finding that the company’s agreement to pay certain expenses so as to clear title was more than nominal consideration and its agreement to list the property for fair market value and allow the owner to stay in the property until closing protected the owner’s interest under law. Additionally, the contract gave the company a legal right to the property and rendered it a party entitled to intervene and redeem. At a subsequent point, the company notified the court that it had recently tendered the redemption amount and listed the property with a real estate broker for fair market value. The lower court dismissed the foreclosure action and ordered the investor to surrender the certificate to the company. Once surrendered, the property was sold for $120,000, of which the original owner received $60,000 after costs and paying the company’s share.

The tax certificate holder appealed, arguing that the investor, as a mere contract purchaser, did not obtain the required sufficient legal interest in the property that would entitle it to intervene in the foreclosure action and redeem the tax certificate. The Appellate Division disagreed with the investor and affirmed the lower court’s ruling. The Court restated that a third-party may redeem a tax sale certificate after the filing of a foreclosure action so long as the third-party timely intervenes in the action and pays the property owner more than nominal consideration for the property. The purpose of the law is not to bar third-parties from helping property owners in desperate need of financial assistance, but to ensure they do not exploit vulnerable owners by offering nominal consideration for their property. Deserving third parties are also permitted to intervene, and tax certificate holders assume the risk inherent in the sales tax certificate foreclosure process instead of offering to purchase the property directly from its owners.

The Court also held that the lower court did not err when it allowed intervention before the company actually closed on the property because the company had offered more than nominal consideration and judicial oversight assured that more than nominal consideration was actually offered. The Court was satisfied that the company’s status as a contract purchaser provided a sufficient basis for intervention and redemption.


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