Pellegrino & Feldstein, L.L.C. - Attorneys at Law

Tax Foreclosure Practice

In Rem Foreclosure Procedure

In rem foreclosure proceedings are available only to municipalities which are the owners of tax certificates.   In rem proceedings are an additional remedy available to the municipality as an alternative to in personam proceedings, pursuant to the In Rem Tax Foreclosure Act.

The municipality may only institute an in rem proceeding if more than six months have expired from the date of the tax sale and all or any portion of the property taxes levied against the property remain unpaid for at least twenty-one months before the commencement of the in rem proceeding.

The governing body of the municipality commences the in rem process by adopting a resolution which lists the land against which such proceedings are to be instituted.   This is known as the "tax foreclosure list".

A foreclosure complaint in rem is then prepared and filed with the Superior Court and in the office of the municipal tax collector, the county recording officer and the Attorney General of the State of New Jersey.   The filing of the complaint in the county recording office acts as a lis pendens and is noted in the margin of each tax certificate referred to in the complaint.

The notice required in an in rem tax foreclosure proceeding has evolved over the last twenty years.

Prior to 1977, the only notice requirements were the publication and posting on the property of the foreclosure complaint.   In 1977, the New Jersey Supreme Court determined, in Township of Montville v. Block 69, Lot 10, that notice of the in rem proceeding was to be given to the owner of the property before his right of redemption could be foreclosed.

Finally, the United States Supreme Court reviewed the issue of notice in in rem foreclosure proceedings in Mennonite Board of Missions v. Adams and held that it is constitutionally mandated that all interested parties, including mortgagees, be notified of the in rem proceeding by personal service or mailed notice.

If such notice is not effectuated, the mortgage will not be foreclosed and will survive the foreclosure judgment.   However, an interested party's failure to immediately attack this procedural defect can result in the foreclosure judgment being held to be effective against that party.   Such a procedural defect does not render the entire foreclosure judgment defective, but renders voidable that portion of the judgment applicable to the unnoticed party's interest.

If an interested party redeems the tax certificate in an in rem proceeding, the plaintiff / municipality is required to promptly file with the county recording officer a statement setting forth that redemption has been made as to a specific parcel of land.   The filing of this statement will act as a discharge of the lis pendens created upon the filing of the in rem proceeding with the county recording officer.

Alternatively, the redeemer may receive a certificate of redemption which can be filed with the county recording officer and which will have the same effect as the statement of redemption.

The foreclosure judgment will vest in the municipality fee simple ownership in the property.

The municipality will obtain full and complete relief to bar the right of redemption and to foreclose all prior and subsequent alienations and all encumbrances on the property.

When a certified copy of the judgment is recorded in the county recording office, the municipality is seized of an estate in fee simple. The county recording officer is required to note on the margin of the recorded tax sale certificate the date on which the foreclosure judgment was recorded.