Real property owners delinquent in the payment of real estate taxes are finding relief though decisions of New Jersey bankruptcy court judges who continue to find ways to impede efforts effect real property forfeitures in New Jersey. This blog reported recently on three cases in the past year where bankruptcy judges in the State have determined that tax lien foreclosures can be set aside if they end in the typical fashion without a judicial sale that includes a competitive bidding process. Now the stakes have been raised by a new decision that resulted in a forfeiture of the claim and avoidance of the lien.
In a case involving a commercial office park that filed bankruptcy because it was not able to redeem the tax lien by paying the full amount owed, the holder of the tax lien was penalized for filing a proof of claim that include the assertion that the debtor property owner was responsible for the payment of sums that are not properly charged to the property owner under the New Jersey tax lien statute. In this case, the lien holder competed for the certificate by bidding down the interest rate to zero and also agreed to pay the highest premium to the municipality. Under New Jersey law, upon redemption the municipality must return the premium to the bidder, and if the lien is not redeemed within five years the premium is surrendered to the municipality. Under no scenario would the property owner be responsible for payment of the premium upon redemption or otherwise. By knowingly including an improper amount as a charge asserted in a proof of claim, the lien holder was found to have violated a certain section of the New Jersey statute on lien enforcement, and the Bankruptcy Judge responded by disallowing the claim and avoiding the lien altogether.
The lesson is that tax lien purchasers need to be very careful when seeking to enforce their claims in bankruptcy and for the property owners both in an out of bankruptcy diligence in reviewing proofs offered in court can help defend against the action to effect a forfeiture of title to the real estate.
For anyone interested, the latest reported decision can be found through West Law at In re Princeton Office Park, __ B.R. __, 2014 WL 341089 (Bkrtcy. D.N.J.).
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