‘Tyler’ and a Call for Reform of the New Jersey Tax Foreclosure … – Law.com

On May 25, 2023, the U.S. Supreme Court issued what most would consider an unremarkable decision, Tyler v. Hennepin County, ___ U.S.____, 143 S.Ct. 1369 (2023), which concluded that the Minnesota tax sale law resulted in an unconstitutional taking in violation of the Fifth Amendment. The taking occurred as a result of the state tax sale law which allowed the county (the Minnesota taxing authority) to retain the owners equity in the real property beyond the amount to satisfy the outstanding taxes. By reason of the Tyler decision, Minnesota will be required to rewrite its tax sale law to permit owners to recover equity in real estate beyond the amount to pay the taxes.

While Tyler would at first blush seem to have a localized effect, the ripples are already being felt in New Jersey, which utilizes a similar tax sale system as the one used in Minnesota. The ripple was first evidenced in an unpublished Appellate Division decision, PC7 REOv. Johnson, No. A-1274-21, issued on June 9, 2023. In Johnson, the court considered whether there existed a basis to overturn a trial court decision in which the trial court refused to vacate a final judgment in tax foreclosure pursuant to New Jersey Court Rule 4:50-1. The Appellate Division agreed with the trial court that the owner had failed to establish a basis to vacate the judgment pursuant to Rule 4:50-1(a) for mistake, inadvertence, surprise or excusable neglect. The Appellate Division noted, however, that the trial court had failed to consider the owners argument for vacation of the judgment pursuant to Rule 4:50-1(f) for any other reason justifying relief from the operation of the judgment or order. The court noted that the U.S. Supreme Court had decided Tyler days after the trial court ruled in Johnson. In light of Tyler, the Appellate Division concluded that the owners argument that the judgment should be vacated pursuantto Rule 4:50-1(f) must be reassessed to consider whether the tax sale certificate holder, PC7, stands to gain an unconscionable windfall by obtaining equity in the property beyond that necessary to redeem the certificate.Id. *5. After detailing the expansive equitable purpose of Rule 4:50-1(f), to avoid a grave injustice, (Id. citing US Bank Natl Assn v. Guillaume, 209 N.J. 449, 484 (2012)), the court concluded:

Read more here:
'Tyler' and a Call for Reform of the New Jersey Tax Foreclosure ... - Law.com