A troubling trend has developed with respect to municipal implementation of the Special Sales Tax authorized by N.J.S.A. 55:19-101, affecting properties listed on their “abandoned properties list” under N.J.S.A. 55:19-43, et seq. Certain municipalities are denying mortgagees and their servicers the basic information necessary to redeem mortgaged properties from special tax sales. In some cases, municipalities have taken the position that a mortgagee is not entitled to redeem at all. If their position is allowed to stand, mortgagees could lose their security interest in a special tax sale even though they are ready and willing to satisfy the conditions to redeem.
Abandoned property lists were first authorized under New Jersey’s 1996 Urban Redevelopment Act, N.J.S.A. 55:19-54, et seq. and 55:19-78, et seq. The purpose was to compel the repair and rehabilitation of abandoned properties. In furtherance of that purpose, under N.J.S.A. 55:19-101, municipalities may conduct “special tax sales” of abandoned properties that are subject to sale for unpaid taxes. In a “special tax sale” the municipality can require that a purchaser or party seeking to redeem not only pay the redemption amount, but also post a bond in an amount necessary to rehabilitate the property or actively rehabilitate the property.
Municipalities may include a property on the abandoned property list if the Municipality determines that the property has not been legally occupied for more than six months, and one or more of the following criteria are met:
- The property is in need of rehabilitation in reasonable judgment of the inspector and no rehabilitation has taken place during that six month period;
- The property has been determined to be a nuisance by the public officer;
- The condition and vacancy of the property materially increases the risk of fire to the property and adjacent properties;
- The property is subject to unauthorized entry leading to potential health and safety hazards; and/or
- The owner has failed to take reasonable and necessary measures to secure the property.
When a mortgaged property is subject to a special tax sale, it is crucial to the mortgagee and/or its servicer that they receive accurate, complete and specific information as to the payoff amount, the rehabilitation required and the basis for the municipality’s conclusion that the prescribed rehabilitation is in fact necessary. If that information is not forthcoming, at this point, the mortgage holder or servicer’s best option is to quickly seek relief from the Court.
Our office has been successful in obtaining court orders requiring municipalities to provide our clients with payoffs and other information necessary to redeem and protect its security. In the face of the unreasonable actions of some municipalities, recourse to the courts will continue to be necessary to protect the mortgage holder’s security. If you are looking for more information or are in need of legal counsel, be sure to contact the attorneys at Sandelands Eyet LLP.