What Happens if Property Taxes Are Not Paid?

Property ownership in New Jersey comes with many responsibilities, and these include quarterly property tax payments. Failing to make these payments can lead to severe consequences for property owners. Read on to learn how municipalities recover unpaid property taxes from homeowners and the consequences of not keeping up with these payments.

Overview of Property Taxes

In New Jersey, municipalities largely depend on local property taxes to maintain their budgets. Property tax payments are generally due quarterly on February 1, May 1, August 1, and November 1. Many municipalities offer a ten-day grace period, after which interest and penalties begin to accrue from the first of the month on the unpaid amount. Every municipality is free to adopt its own policies, so be sure to check the policies of your municipality.

Property owners have an ongoing responsibility to find out how much they owe in property taxes, regardless of whether they receive a tax bill. N.J.S.A. § 54:4-64. If you never received a property tax bill or have misplaced it, there are other ways to find out how much you owe. Contacting your local tax collector is the best way to learn the amount you owe. Many municipalities also provide this information online. Since online data is not always up to date, contacting your local tax collector is encouraged.

Tax Sales

To collect outstanding property taxes, municipalities arrange what are known as tax sales. These are public auctions held by every township in New Jersey as required by law. In a tax sale, Tax Sale Certificates are auctioned off to investors. Municipalities use the proceeds from these certificates to recover unpaid taxes, allowing them to satisfy their budgetary needs. Certificates represent liens on property, and holders are entitled to receive unpaid property taxes plus interest. The rate of interest varies depending on the jurisdiction. Julia Kagan, What Is a Tax Lien Certificate? How They’re Sold in Investing, Investopedia, June 7, 2024.

There are two types of tax sales: standard and accelerated. Standard tax sales take place with respect to the prior year’s delinquent taxes. Accelerated tax sales take place during the same year in which taxes are delinquent. Not every municipality carries out accelerated tax sales.

Foreclosure

You may be wondering why investors would want to bid on the right to collect unpaid property taxes. After all, it seems like a risky investment! Here is the catch: as lien holders, investors have the right to initiate foreclosure proceedings. Through the foreclosure process, investors can force the sale of homes to recoup their investment.

In New Jersey, holders of Tax Sale Certificates must wait a statutory period before foreclosure can begin. If there is a winning bidder at a tax sale, he or she must wait two years before filing a foreclosure action. During that two-year period, the homeowner may redeem the property by paying the full amount owed including outstanding interest, penalties, and costs. If after the two years the amount is not fully paid, the holder of the Tax Sale Certificate may begin foreclosure proceedings.

If there are no bidders at a tax sale, the certificate simply goes to the municipality. The homeowner may reclaim the property by paying off the outstanding amount within six months. If in six-months the full amount is not paid off, the municipality may initiate foreclosure proceedings.

If a property is abandoned, then foreclosure can take place immediately after the tax sale. A property is considered abandoned in New Jersey if it has not been legally occupied for six months and at least one installment of property tax remains unpaid and delinquent. N.J.S.A. 55:19-81.

Stop the Sale!

A homeowner who misses property tax payments may find themselves facing a scheduled tax sale. In these cases, the sale can be prevented by paying the full amount due, including interest and costs. N.J. Stat. § 54:5-29. By paying off the full amount, the owner can remove their property from the tax sale.

If a property was part of a tax sale and the sale has concluded, the owner does not automatically lose his or her ownership. However, if the property owner fails to pay the full amount due by the end of the statutory period, then foreclosure proceedings may begin.

Exercising the Right to Redeem

Homeowners may exercise their right to redeem by paying the full balance of taxes, penalties, and interest until a court enters judgment foreclosing the right of redemption. N.J. Stat. § 54:5-87. After three months following the date of this judgment, the foreclosure can no longer be challenged in court except on the bases of jurisdiction and fraud. Once a foreclosure has been finalized, it is very difficult to reclaim ownership of the property.

Drowning in Property Taxes?

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Conclusion

Property owners are encouraged to keep up with all quarterly payments to avoid having their properties scheduled for tax sales. Fortunately, mandatory waiting periods allow property owners to exercise their redemption rights before foreclosure proceedings may begin.

If you are struggling to meet your property tax obligations, do not wait until your tax burden becomes too much to bear. Consider hiring the experienced tax attorneys at McKirdy, Riskin, Olson & DellaPelle, P.C. Our firm has advocated for the rights of New Jersey Property owners for over fifty years. We have the knowledge and expertise to zealously represent your property interests. Depending on the facts of your case, we may be able to considerably reduce your property tax burden.