New Jersey Tax Lien Certificates

Type of Tax Sales in New Jersey Counties

New Jersey holds public auctions for tax default property; the winning bidder receives a “Certificate of Sale.” The amount of the certificate is the total of taxes owed, interest, and other administrative charges. The winning bid will be the person willing to pay to most for the property. The Interest rate is 18% on liens over $1500.00 and 8% if the lien against the property is less than $1500.00.

When are the auctions held?

Auctions in New Jersey take place throughout the year.

The Tax Lien Process in New Jersey

In New Jersey, you are not bidding on the property itself; you are bidding on the right to collect interest on the lien you purchase at the auction. The interest rate on Tax Liens is as follows:

$0 - $1,499.00 8% Interest
$1,500.00 - $9,999.00 18% Interest
Over $10,000.00 additional 6% penalty

In most counties or municipalities (any tax collecting entity) of New Jersey the winning bid must be paid in cash immediately following the auction. There is also a “Right of Redemption” encumbrance on the lien. This means that the former owner can pay the total amount due, and extinguish the lien against the property. The interest accrued from the date of the “Certificate of Sale” would go to the holder of the certificate. Also, once you are the holder of the lien against the property, you can pay additional charges and taxes against the property and collect the interest on those payments as well. If the owner of the property does not redeem the liens against the property within 2 years, the holder of the certificate can begin foreclosure on the property.

Here's an example of how a TLC purchase could work in New Jersey:

Winning Bid Amount: $5,200.00

Face Value of Lien: $5,000.00

Recording Fee's: $60.00

Other Charges: $40.00

So, in this example the winning bidder paid a $ 200 dollar premium on the lien. If the owner of the property redeems the lien after 13 months, the holder of the lien will get about $ 6,214.00. You paid $ 5,300.00 at auction with other charges, so your net gain will be about $ 914.00. Now, if the owner does not redeem with 24 months, you can begin the foreclosure process. Specific Laws are in place to notify the owner of the property that foreclosure has begun, and the owner must respond within certain time limits before the right to redeem is extinguished. The holder of the certificate may be responsible for notifying the owner, and you may need to consult a lawyer to make sure all required actions are taken care of.