New jersey tax lien certificate

New Jersey municipal property tax liens had priority over all other liens against an insolvent estate because municipal tax liens, including those incorporated in tax sale certificates, have first-lien status under New Jersey law.

Following the decedent's death, the trial court declared the estate insolvent and directed that all creditors be paid on a pro rata basis. The municipality and the purchaser of a tax sale certificate on the property of the estate contended that the trial judge erred in ordering the sale of the property and the distribution of the proceeds without first ordering payment of the municipal tax liens and exceeded his authority by subordinating the tax sale certificate to other personal debts of the estate.

Municipal liens are continuous on the land and must be paid before the proceeds of a sale flow to the owner or other creditors of the property owner. Additionally, pursuant to state law, the municipal lien had first priority, and the buyer of the tax sale certificate was entitled to the sum paid for the certificate, plus interest. There is no statutory provision for partial redemption of a tax sale certificate as the trial court had previously ordered. Furthermore, the super priority of municipal tax liens is consistent with the public policy of New Jersey to encourage and assist municipalities in the collection of delinquent taxes. (In the Matter of Prior, New Jersey Superior Court, Appellate Division, No. A-0826-02T5, February 18, 2004.)

Copyright CCH Incorporated: Federal and State Tax Mar 16, 2004
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