MUNICIPAL TAXES, TAX SALE CERTIFICATES, AND THE MATTER OF PRINCETON OFFICE PARK – (Part 1 of 4) – The Need for Muncipalities to Sell Tax Liens

more+
less-

The Need For Municipalities To Sell Tax Liens

In New Jersey, unpaid real estate taxes are a “continuous lien” on land, N.J.S.A. § 54:5-6. However, it is often not easy for municipalities to realize a sufficient financial return on these liens. To enable municipalities to fund their operating budgets, New Jersey therefore lets them sell these tax liens. See N.J.S.A. §§ 54:5-1. Moreover, because these liens carry the same statutory 18% interest rate which a property owner must pay the municipality on real estate tax claims, the sale process has worked well for years, generating sufficient numbers of buyers. Indeed, an industry has grown up of tax certificate buyers who inject liquidity into the municipality finance system by purchasing outstanding tax liens.

Unfortunately, in 2010 this system was thrown into chaos by a bankruptcy court ruling in the matter of In re Princeton Office Park, L.P., 423 B.R. 795 (Bkrtcy. D.N.J. 2010), aff’d, Civil No. 10-3021 (D.N.J. filed September 14, 2010). This opinion declared that a bankruptcy court could arbitrarily change the statutory 18% interest rate paid on tax liens, even well after the liens had been purchased in the open market, thus effectively overturning the careful financial calculations that tax certificate buyers make in deciding to purchase liens. For nearly two years, while this ruling has wended its way up the appeal ladder, it has cast a pall over municipal finances and chilled the purchasing of tax liens. This blog post, and several others that will follow, will explore this ruling and its impact on municipal finances in New Jersey...

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Joel Glucksman, Scarinci Hollenbeck | Attorney Advertising

Written by:

more+
less-

Scarinci Hollenbeck on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×