TRENTON, N.J. – In New Jersey, if a person faces a tax lien on her home, her municipality can strip the homeowner of any equity she has in the property, leaving residents homeless and financially strapped. The practice is known as home-equity theft.
Assemblyman Jay Webber introduced a bill (A4752) to end that unfairness and allow former-homeowners to walk away with financial compensation from the forced sale of their property while still fully compensating municipalities.
“Under current practice, government, or a third party investor, wins at the expense of the homeowner when they sell the property for more than the value of outstanding tax liens,” said Webber (R-Morris). “People need to pay off old tax liens, but once those are paid from the sale of property, homeowners should receive compensation for the equity they built.”
New Jersey law allows the Superior Court to foreclose on properties with tax debt and grant the home title to the holder of the tax lien certificate, stripping former-homeowners’ rights to receive any compensation from the sale of the property.
Webber’s bill would require county sheriffs to hold an internet auction of the property, divvying up proceeds to pay off fully any debt on the tax lien with the rest of the money going to the foreclosed former-homeowner.
“People work hard to build up equity in their home as part of a nest egg. That money is typically far more than what is owed on a tax lien, and government shouldn’t wipe out that equity. It only exacerbates housing and homelessness problems,” said Webber. “Covid-19 has increased the importance of passing this bill quickly. More people face the prospect of losing their homes and any financial footing they had before the virus.”