Bill Allowing Property Owners to Recoup Some Equity from Foreclosed Property Becomes Law 

Governor Phil Murphy signed legislation last week that will update New Jersey tax law to protect property owners whose properties are foreclosed upon due to a tax lien. Assembly members Barbara McCann Stamato, William B. Sampson, and Yvonne Lopez sponsored Bill A3772. 

The legislation brings New Jersey’s tax law into compliance with the 2023 United States Supreme Court decision in Tyler v Hennepin County, Minnesota, et al. That ruling determined that Hennepin County could not keep equity in property beyond the amount it was owed for overdue property taxes and interest.

“I am incredibly proud that my first bill, A3772, has been signed into law by Governor Murphy. This legislation modernizes the tax sale law, dating back to 1918, and protects distressed property owners by allowing a sheriff sale up until final judgment, except for abandoned properties,” said Assemblywoman McCann Stamato (D-Hudson). “It also ensures municipalities can foreclose on delinquent properties in accordance with the Tyler decision by the Supreme Court. I am proud to have moved this bill forward and to see it signed into law.”

A3772 gives property owners whose property is subject to a tax lien foreclosure – or their heirs – the option to request a public sale at which equity could be recovered. In line with the Tyler decision, the homeowners would be entitled to the surplus equity, beyond the amount of unpaid taxes. The bill requires that the notice provided by the lien holder to property owners of the intention to file a foreclosure complaint must advise the owner or the owner’s heirs of their rights to request a judicial sale or Internet auction.

“The Tyler decision was a game changer for people who have lost their homes due to financial hardships,” said Assemblyman Sampson (D-Hudson). “Now, thanks to this new law, these same people are empowered with the ability to recover their equity that can help get them back on solid footing.” 

For abandoned properties, no judicial sale or Internet auction would be required and the New Jersey Superior Court would be authorized to bar any claims to surplus equity as part of a foreclosure auction.

“The signing of A3772 is a victory for both property owners and municipalities,” said Assemblywoman Lopez (D-Middlesex). “Thanks to the legislation, property owners will receive the protections they are entitled to under the Tyler decision and our municipalities will benefit from the certainty provided by the new system of tax lien sales that they rely on to offset for their annual budgets.”

The law takes effect immediately.