Legislative Briefing New Jersey’s Revision to Tax Sale Foreclosures: New Jersey A3772

JOSHUA MILLER

5, September 2024

On July 10, 2024, Governor Phil Murphy signed a tax sale revision law (A3772/S-2334), which modifies the process for investors engaged in tax sale foreclosures and provides steps for homeowners to protect their equity.[1] Senator Brian Stack (D-33) introduced this law in January 2024 in part because of the case of a 94-year-old Black woman named Geraldine Tyler, who lost her home and equity in the tax sale foreclosure process. In 1999, Mrs. Tyler purchased a one-bedroom condominium in Minneapolis, Minnesota. She lived in the condominium until 2010 when problems in the neighborhood prompted her to rent an apartment in a safer area. She experienced financial difficulties, leading her to get $2,300 in tax arrears, which increased to $15,000 with penalties and interest. In 2015, Hennepin County, Minnesota, seized her condominium, sold it for $40,000, and pocketed $25,000 in surplus equity. On May 25, 2023, the United States Supreme Court unanimously held in Tyler v. Hennepin County that the municipality violated the Takings Clause of the U.S. Constitution when they stripped and retained Mrs. Tyler’s equity. [2]  

According to housing advocates, cases like Geraldine Tyler also occur in New Jersey, as homeowners lose significant surplus equity in the more than 1,000 tax sale foreclosures that occur each year. [3]   The New York Times reported that New Jersey' tax sale foreclosure process confiscated over $115 million in equity from 2014 through 2021. They found that over 661 properties in 31 towns were sold through the tax sale process, with homeowners losing an average of $174,000 in equity over and above the tax debt. [4]  The Legal Services of New Jersey (LSNJ) reported to the Senate that one of their disabled clients almost lost a $200,000 home to foreclosure for just $17,000 in tax arrears.[5] The homeowner had about $180,000 in equity above the tax arrears for this property. LSNJ also helped an intellectually disabled man about to lose a $470,000 home after falling $70,000 in tax arrears. Soon after they saved his home, the property value increased to $500,000, meaning the tax sale foreclosure would have taken that $30,000 in increased equity. After hearing cases on this problem in the state, a unanimous New Jersey Appellate Division panel on December 4, 2023, followed up on the Supreme Court decision and found that New Jersey's tax sale foreclosure laws violated both the United States and New Jersey Constitutions because they stripped homeowners of their equity. [6] One month later, Senator Brian Stack (D-33) introduced a tax sale revision law (S-2334 A3772), which intended to revise the process for tax lien holders (investors) to foreclose on delinquent properties and allow property owners to protect their remaining equity.

In this legislative brief, CLiME seeks to analyze the tax sale revision law to assess how its respective provisions line up with its legislative purpose and the Tyler decision. This law will impact dynamics central to CLiME’s mission of promoting equality through preserving the wealth of communities of color and lower-income areas of the state. It would also be relevant to "Who Owns Newark,” our 2022 report where we found that institutional investors were buying foreclosed homes in Black and Latino communities at a disproportionately high rate. These practices undermine the city’s goals of greater homeownership and more affordable rental housing while leading to the transfer of wealth from communities of color to a rental market controlled by corporate buyers.[7] Given the lack of racial breakdown on tax sale foreclosures in New Jersey, however, this legislative brief does not center its analysis around preserving wealth for communities of color, even if we can presume this law would most impact them. Instead, this analysis takes a broader view, centering its analysis on the debate around this law and examines how it tries to balance the interest of investors and municipalities against the homeowners' right to preserve their equity.

Continue reading the legislative briefing in its entirety below:

Legislative Briefing: New Jersey’s Revision to Tax Sale Foreclosures: New Jersey A3772

[1] An Act revising the process for a property tax lien holder to foreclose the right to redeem a property tax lien, amending various parts of the statutory law, and supplementing chapter 5 of Title 54 of the Revised Statutes and P.L.1948, c.96 (C.54:5-104.29 et seq.).

[2] Tyler v. Hennepin County, Minnesota, et al., 143 S. Ct. 1369 (2023)

[3]  JSMTAdmin, “New Jersey Tax Foreclosure Updates (as of March 2024),” Ira J. Metrick, Esq., March 21, 2024, https://www.metrickesq.com/blog/new-jersey-tax-foreclosure-updates-as-of-march-2024/.

[4] 1Tracey Tully, "She Lost Her Childhood Home over Taxes. Then It Erupted in Flames." The New York Times, February 1, 2023, https://www.nytimes.com/2023/02/01/nyregion/nj-maplewood-home-arson.html#:~:text=Between%202014%20and%202021%2C%20in,in%20equity%2C%20the%20group%20found.

[5] Statement of Legal Services Of New Jersey To the Senate Community and Urban Affairs Committee

On S-2334, February 15, 2024

[6] 257-261 20th Avenue Realty, L.L.C. v. Roberto, ___ N.J. Super. ___ (App. Div. 2023).

[7] David Troutt and Katherine Nelson, “Who Owns Newark? Transferring Wealth from Newark Homeowners to Corporate Buyers,” https://www.clime.rutgers.edu/publications-filtered/who-owns-newark, May 2, 2022, https://static1.squarespace.com/static/5b996f553917ee5e584ba742/t/626fd98bb8357d201cb8dcb5/1651497359130/Who+Owns+Newark+Final+1.pdf.