The New Jersey Supreme Court has agreed to take up a case about who has priority when competing parties seek to acquire a property in a tax sale foreclosure.
Fast-rising home values and the ability to search online for homes in foreclosure have led to growing competition among investors in homes with delinquent property taxes, motivated by the chance to get a property cheaply, observers said.
But tax lien investors say an October 2021 Appellate Division decision was an unwarranted shake-up of established rules for redeeming a tax sale once foreclosure has started.
The justices, in a Feb. 8 order, granted certification in Green Light Capital v. Calderon. No hearing date has been set. In that case, the plaintiff claimed last year’s Appellate Division ruling disregarded binding precedent from a 2007 state Supreme Court case, Simon v. Cronecker.
In Cronecker, the court said an investor seeking to buy a property after a tax sale foreclosure had begun had to apply to the judge in that case for permission to intervene as a party.
But in Green Light, the appeals court upheld a trial judge who said that an investor was free to buy a condominium from its owner and pay off the outstanding tax bill, before moving to intervene, as long as the motion to intervene was filed before the court entered an order setting the last date for redemption.
Cronecker also said the judge should ensure that the homeowner whose property is subject to a tax sale foreclosure is receiving at least nominal value from the sale. A statute enacted in 2021 changed that standard from nominal value to fair market value.
Keith Bonchi, of Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi & Gill in Northfield, representing plaintiff Green Light Capital, said the disparate rulings were causing confusion among lawyers.
“What you have is an Appellate Division case saying one thing and a Supreme Court case saying another thing. We thought it was pretty clearly set forth in Cronecker what the law was. We respectfully disagree with the judges in the trial court and the Appellate Division.” Bonchi said.
Stephen McNally, of McNally & Bellino in Cherry Hill, New Jersey, who represented the intervenor, an entity called 113 73rd St. Apartment, declined to comment.
Green Light Capital purchased a tax sale certificate for a condominium in North Bergen, New Jersey, in 2018 for $3,168, representing $2,623 in unpaid property taxes plus interest and fees. After the property owner, Gabriel Calderon, failed to repay the outstanding amount for two years, Green Light filed to foreclose on the property. After the condo went into foreclosure, 113 73rd St. sought to buy the property and redeem the tax sale certificate.
Green Light sought a court order stopping 113 73rd St. from redeeming the tax sale certificate. The trial judge denied the motion. On appeal, Green Light claimed the trial court disregarded Cronecker by failing to move for intervention before attempting to redeem the tax sale certificate. The appeals court panel said the facts in Green Light were distinguishable from Cronecker.
The court has also granted amicus status to the National Tax Lien Association. A member and past president of that group, Robert Keyser of Taylor and Keyser in Haddonfield, New Jersey, said the Appellate Division’s Green Light decision as inconsistent with Cronecker.
“It’s a direct contravention. The Supreme Court said [the motion to intervene must be filed] after the [foreclosure] complaint is filed. The Appellate Division said it’s OK as long as you [file the motion for intervention] before the order setting time, place and amount of redemption. There’s no justification anywhere for that,” said Keyser.
Keyser said the Appellate Division ruling would make tax sale certificates a less attractive option for investors.
“Anything that makes it easier for someone to swoop in and take your property will be a disincentive to the tax lien industry,” he said.
Michael O’Donnell, a co-managing partner at Riker Danzig Scherer Hyland & Perretti in Morristown, who sometimes deals with tax sale issues in his representation of title insurance companies, believes the Appellate Division ruling in Green Light is consistent with Cronecker. He noted that homeowners who lose their homes to a tax sale foreclosure are at risk of suffering devastating financial consequences and may lose large amounts of equity.
“It’s their property. They should have the right to sell their property and to get something before they get foreclosed out,” O’Donnell said.