NJ Invisible Tax Lien – Investors Beware!
Those who invest in properties in the state of New Jersey know the danger of misinterpreting municipal certificates of sale for sewer, water charges, common charges or unpaid taxes. Typically, the lien clearly states what municipal charge has gone unpaid, but sometimes it’s tricky to interpret the lien. Let me share a dangerous case with you to show some of the issues lenders or investors can stumble upon.
One of our clients is a mortgage servicer that hires a 3rd party to check the tax statuses on properties. The 3rd party tax search provider reported that the taxes on a particular property were completely paid based on the online printout available through the township tax collector. See below:
One of our clients is a mortgage servicer that hires a 3rd party to check the tax statuses on properties. The 3rd party tax search provider reported that the taxes on a particular property were completely paid based on the online printout available through the township tax collector. See below:
There is a note that there is a lien on the property which the 3rd party firm assumed was for the utilities and therefore ignored the warning, foregoing further research on the lien flag in the township.
The servicer received a sheriff’s notice that the tax foreclosure was initiated against the property (aka Tax Sale) on the unpaid taxes.
The issue was that the taxes for 2017 were sold to a 3rd party investor and the investor was paying consecutive years of taxes for the property, accruing the maximum allowable interest rate on the prior years of unpaid taxes by the lender or owner of the property.
The Municipal Tax Certificate was indeed for 2017 Taxes, but from the way it appeared in the county’s records, it seemed that it was for an unpaid sewer lien.
The servicer received a sheriff’s notice that the tax foreclosure was initiated against the property (aka Tax Sale) on the unpaid taxes.
The issue was that the taxes for 2017 were sold to a 3rd party investor and the investor was paying consecutive years of taxes for the property, accruing the maximum allowable interest rate on the prior years of unpaid taxes by the lender or owner of the property.
The Municipal Tax Certificate was indeed for 2017 Taxes, but from the way it appeared in the county’s records, it seemed that it was for an unpaid sewer lien.
The correct way to interpret the lien is to carefully examine the number of line items on the lien and the totals. When there are two lines of amounts, that means there is more than one tax type being sold. So even though Sewer is one of them, the other is regular taxes, meaning this should be interpreted as a tax lien against the property.
The reason the NJ tax lien was invisible is because the township tax collector only reported the last three years’ worth of PAID taxes (2021-2019), while “hiding” the year of the sold tax certificate (2017).
As a part of ProTitleUSA due diligence, we always verify the payoff for a Certificate of Municipal Sale, as well as provide redemption details and possible scheduled dates of the tax/municipal foreclosure.
The reason the NJ tax lien was invisible is because the township tax collector only reported the last three years’ worth of PAID taxes (2021-2019), while “hiding” the year of the sold tax certificate (2017).
As a part of ProTitleUSA due diligence, we always verify the payoff for a Certificate of Municipal Sale, as well as provide redemption details and possible scheduled dates of the tax/municipal foreclosure.