State Senate Committee Hears Concerns Tax Lien Foreclosures in Light of Tyler v. Hennepin
The New Jersey Senate Community and Urban Affairs Committee recently considered bills related to tax lien foreclosures, addressing the U.S. Supreme Court’s ruling in Tyler v. Hennepin County, MN, 143 S. Ct. 1369 (2023). The New Jersey State Bar Association is closely monitoring the bills.
One measure, S2334 (Stack), was up for discussion only. It would revise the process for property tax lien holders to foreclose the right to redeem a property tax lien and allows the property owner to protect the remaining equity. Consistent with the holding in Tyler, the bill would clarify that a lien holder that holds the tax sale certificate to a property may not keep the equity in the property beyond the amount owed for overdue taxes and interest. The Supreme Court held that such equity is property and withholding it from the property owner would be inconsistent with the takings clause in the Fifth Amendment of the federalConstitution.
Speakers cautioned that amendments were needed to protect property owners, and municipalities that rely on third party tax lienholders to fund the tax deficits to meet the municipal budget goals. Those third party tax lienholders – often investors who pay interest to hold the notes – also expressed concerns that limiting their recovery of premiums would discourage further investment, putting municipalities at risk of losing money.
Among the speakers was David Deerson, of Pacific Legal Foundation, who was on the team of attorneys who litigated the Tyler matter. Testifying in opposition to the bill, Deerson expressed concern about what he termed the “you snooze you lose” provision of the bill. Under the current version of the bill, a property owner who believes there is equity must file a claim to preserve that equity.
The Supreme Court Working Group on Tax Sale Foreclosures issued a report recently making recommendations to update Judiciary forms, amend legislative provisions relative to tax lien foreclosures, amend Court Rules relative to tax lien foreclosures and raised questions for further discussion on the issue. That report is available at njcourts.gov.
The bill was not up for a vote and remains pending in the Senate Community and Urban Affairs Committee.
LLC Disclosure Bill Passes Out of Senate Committee
Also on the agenda of the Senate Community and Urban Affairs Committee was S276 (Stack), which requires limited liability companies (LLCs) to disclose ownership information when submitting a deed for recording. The NJSBA expressed concerns with the bill because of the potential impact on privacy rights of the members of LLCs.
Amendments to the bill would require identification of each beneficial owner, instead of the registered agent of an LLC when it files a deed for recording. Additional identification from a beneficial owner would be required and the measure would expand a temporary exemption from a notice requirement to an additional class of LLCs. The NJSBA has not yet taken a position on the amendments to the bill, and will continue to monitor its movement.