Tax Sale Certificate Holder Rights Upheld

by: Richard De Angelis
10 Oct 2009

In DSC of Newark Enterprises, Inc. v. South Plainfield Borough, decided October 6, 2009 (Approved for Publication in N.J. Tax Reports), the New Jersey Tax Court was confronted with an issue concerning the amount and allocation of a refund resulting from tax sale certificates that were issued as a consequence of nonpayment of taxes on the subject proeprty during the pendency of the tax appeal.  In its ruling, the Tax Court clarified the rights of the taxpayer, municipality and tax sale certificate holder. 

 A taxpayer is required to pay taxes during pendency of tax appeal, notwithstanding a purported agreement with a taxing authority providing that no taxes would be paid because both parties anticipated a substantial refund.  In this case, tax sale certificates issued were not void ab initio because the tax appeal resulted in a considerably reduced assessment and corresponding tax liability. 

 The certificate holders’ rights were preserved.  The town was authorized to deduct from the refund the amount needed to redeem tax sale certificates, in addition to any penalties, back taxes and other municipal charges and interest owed by the taxpayer. 

 As part of the settlement of the tax appeal, the parties agreed that statutory interest would be waived on the refund if it was paid within 60 days of the judgment.  The municipality withheld payment of the refund while the taxpayer disputed the municipality’s refund calculations.  Because the municipality withheld the undisputed amount of the refund beyond the 60 day time period, it was obligated to pay interest on the refund.  

This case recognizes that the statutory rights of a tax sale certificate holder will be protected even when a property owner and a municipality may make an agreement as to the allocation of refunds that may be owing in a successful property tax appeal.