New Jersey tax sale certificates: redemption and the foreclosure timeline

How the municipal tax sale works

In New Jersey, the town collects property taxes, and unpaid taxes are a lien on the property. When taxes or other municipal charges are still unpaid at the close of the fiscal year, the tax collector must enforce the lien by holding a tax sale in the following fiscal year. Towns can also hold an earlier "accelerated" sale late in the same year (N.J.S.A. 54:5-19).

The Division of Local Government Services explains that the sale does not transfer title. What is sold is a tax sale certificate, a lien on the property (DLGS, Elements of Tax Sales in New Jersey). Bidders compete by bidding the interest rate down from 18%. If the rate reaches 1% or less, they bid a premium instead. The town holds the premium for up to five years, and it is returned to the holder if the property is redeemed (N.J.S.A. 54:5-33).

The certificate keeps growing. Taxes keep coming due after the sale, and the holder can pay them and add them to the lien (DLGS). If no one else bids, the certificate is struck off to the town at 18%, and the town has the same rights as any other buyer, including the right to foreclose (N.J.S.A. 54:5-34).

Redeeming a tax sale certificate

Redeeming means paying off the certificate. The owner, the owner's heirs, a mortgage holder or an occupant can redeem "at any time until the right to redeem has been cut off," by paying the municipal tax collector (N.J.S.A. 54:5-54). You don't pay the investor directly.

To get the exact number, ask the tax collector in writing. The collector must give a party entitled to redeem two redemption calculations a calendar year at no cost; a town may charge up to $50 for each one after that (§ 54:5-54). The amount generally includes:

• What the holder paid at the sale, plus interest at the winning bid rate (N.J.S.A. 54:5-58).
• Any later taxes or municipal liens the holder paid, plus allowed expenses (§ 54:5-58).
• A redemption penalty of 2% of the certificate amount over $200, 4% over $5,000, or 6% over $10,000 (N.J.S.A. 54:5-61).
• Once a foreclosure notice or lawsuit starts, capped legal costs (see the table).

When the holder can foreclose

A certificate holder can't take the house without a lawsuit in Superior Court. Under N.J.S.A. 54:5-86(a), a town that bought the certificate at the sale (or its assignee) can file after six months. Any other holder, such as a private investor, must wait two years from the date of the sale. If the property meets the legal definition of abandoned property, a holder can file at any time (§ 54:5-86(b)).

To recover its search and legal fees, a private holder must first send the owner at least 30 days' notice by certified mail, with the amount needed to redeem, before it files. Since 2024, that notice must also tell the owner about the right to ask for a sheriff's sale to protect equity, unless the property is abandoned (N.J.S.A. 54:5-97.1).

Filing the lawsuit does not end your right to redeem. The right continues until the court bars it in a final judgment (§ 54:5-86(a)). If no one redeems, the judgment can give the holder the property.

2024 changes after Tyler v. Hennepin County

On May 25, 2023, the U.S. Supreme Court decided Tyler v. Hennepin County. The Assembly committee statement on New Jersey's response says the Court "determined that Hennepin County could not keep the equity in the property beyond the amount it was owed" for taxes and interest. It also says that under prior New Jersey law, a foreclosing lienholder received title "and all of the equity remaining in the property" (Assembly committee statement, A3772).

New Jersey responded with P.L. 2024, c. 39, approved July 10, 2024 and effective immediately for tax liens not yet foreclosed. The key points:

• You can demand a sale. The owner or the owner's heirs can ask the Superior Court in writing, before final judgment, for a sheriff's sale or a sheriff's Internet auction instead of a straight transfer to the holder (§ 54:5-87(b)).
• You must be told. The holder must include this right in bold type with the summons and complaint (§ 54:5-98.1).
• Surplus goes to court. After the holder is paid the redemption amount, costs and fees, the sheriff deposits any surplus with the clerk of the Superior Court. The owner or heirs claim it by motion (§ 54:5-87(b)).
• The holder takes a cut. When a sale is demanded, the holder gets a first lien on the surplus of 10%, up to $5,000, for administrative costs (§ 54:5-98.1(b)).
• Silence has a cost. If no one demands a sale, the foreclosure can proceed without one, and the owner and heirs have no claim to the equity (§ 54:5-87(b)).

The auction price is "conclusively presumed" to be fair market value. If no one bids, the law presumes there was no equity (§ 54:5-87(b)).

Selling before final judgment

Until a final judgment, you still own the house and can sell it. At closing, the title company gets a redemption figure, pays off the certificate from the sale proceeds, and the rest goes to you after the mortgage and other liens. If the foreclosure has been filed, redemption runs through that case (§ 54:5-98(a)). Your title company or attorney can handle that step.

A sale you arrange yourself avoids two things built into the post-2024 process: an auction price that the law treats as fair value, and the holder's 10% claim on the surplus. Remember New Jersey's seller-paid Realty Transfer Fee when you estimate what you'll net (see transfer tax by state).

If you're weighing your options anywhere in New Jersey, including Trenton and Camden County, we can give you a written cash offer to compare with redeeming on your own. If a mortgage foreclosure is also under way, see how long foreclosure takes in New Jersey.

Frequently asked questions

Sources

1. New Jersey Legislature, P.L. 2024, c. 39 (Assembly Bill 3772), amending N.J.S.A. 54:5-33, 54:5-86, 54:5-87, 54:5-97.1 and 54:5-98 and adding 54:5-98.1
2. New Jersey Legislature, Assembly State and Local Government Committee statement to A3772 (June 24, 2024)
3. New Jersey Statutes, Tax Sale Law: 54:5-19, 54:5-32, 54:5-34, 54:5-54, 54:5-58, 54:5-61, 54:5-86, 54:5-87, 54:5-97.1, 54:5-98.1
4. NJ Department of Community Affairs, Division of Local Government Services, Elements of Tax Sales in New Jersey
5. Supreme Court of the United States, Docket No. 22-166, Tyler v. Hennepin County

This is general information, not legal or tax advice. Tax sale rules and local procedures change. For advice on your situation, contact your municipal tax collector, Legal Services of New Jersey, or a New Jersey attorney.