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It
has been said that there are two
things that cannot be avoided in life:
death and taxes.
When it comes to
property tax liens there are certain situations where a good lawyer can
help
you. As for death,
you are still out of
luck.
First, a little about property tax liens
in New Jersey. If a
property owner does
not pay his or her taxes, then the tax collector of the municipality
where the
property is located will conduct an auction of a tax sale certificate. At the sale bidders bid
against each other to
determine the interest rate that will be charged for the tax
certificate. If the
interest rate is bid down to 0%, then
monetary bids (or premiums as they are referred to) are paid. The municipality returns
the premium to the
certificate purchaser if the lien is redeemed within five years. If not redeemed, the
municipality keeps the
premium. After the
tax sale the
successful purchaser can pay subse-quent taxes and be entitled to an
interest
rate of 18%.
If no tax certificate is sold the
property owner is directly responsible to the municipality for the back
taxes
plus 18%. However,
once the tax
certificate is sold the nature of the debt changes.
The reason for this is that the
purchaser
only has a lien, not a tax claim.
The
difference is that that the municipality is empowered to assess and
collect
taxes. The tax
certi-ficate buyer only
has a lien that can be satisfied by payment of the amount paid for the
certifi-cate,
a redemption rate of interest (usually 18%), and a premium. Furthermore, subsequent
tax sale certificates
have precedence over older ones.
Now, for the situation in which a tax
certificate has been sold. First,
an
interest rate has to be established. The United States Supreme Court
has
weighed in on this issue and has concluded that the appropriate
standard is the
“prime rate plus a risk factor.” The
risk factor usually is valued at 1% to 3%.
In conclusion, you may be in a position
in which you have the opportunity to significantly reduce the amount
you owe in
your back property taxes. It
may mean
the difference between keeping your house or losing it.
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