Topic:
MUNICIPALITIES; LIENS; PROPERTY TAX;
Location:
TAXES - PROPERTY;
Scope:
Court Cases; Other States laws/regulations; Connecticut laws/regulations;

OLR Research Report


The Connecticut General Assembly

OFFICE OF LEGISLATIVE RESEARCH




January 19, 1994 94-R-0183

TO:

FROM: Saul Spigel, Chief Analyst

RE: Tax Lien Assignments

You asked us to compare Connecticut's law allowing towns to assign tax liens with New Jersey's.

SUMMARY

Connecticut's new law allowing towns to assign tax liens is quite general compared to New Jersey's more detailed and prescriptive statutes. Connecticut law merely allows towns to make assignments and negotiate the payment for them. It gives assignees the same rights to enforce the liens as any other private lienholder and gives them the same rights as the town in regard to the liens' priority, interest, and fees.

In contrast, New Jersey has four separate statutes dealing with lien assignments depending on the relationship of the tax debt, property assessment, and property value. It allows a town to make an assignment either through a public sale to the highest bidder or a private sale, and for each method spells out notice requirements and procedures. One of New Jersey's assignment laws also requires the assignee to foreclose on the owner's right of redemption within two years of taking the assignment.

CONNECTICUT

Connecticut's law authorizing towns to assign their tax liens to third parties became effective only on October 1, 1993 pursuant to PA 93-434. It permits a town's legislative body, by resolution, to assign any and all of its tax liens on real property. The amount paid for the assignment is determined by negotiation between the town and the assignee. The law gives the assignee the same legal rights and powers as the municipality and its tax collector with regards to the liens' priority, interest accrual, and collection fees. It also gives the assignee the same rights to enforce the lien as any private lienholder.

NEW JERSEY

New Jersey has four separate statutes authorizing municipalities to sell or assign "tax sale certificates," which are the official certification that taxes are due and owing and appear tantamount to tax liens in Connecticut. One state court wrote that these laws had been adopted piecemeal in response to specific problems and overlap in some areas (Dvorkin v. Dover Twp., 29 NJ 303).

The earliest law (N.J.S.A 54:5-112) dates from 1922. It allows the private sale of a town's interest in property for an amount not less than the liens against it. But this law apparently did not cover situations where the liens exceeded the assessed value of the property because the legislature passed a subsequent act (N.J.S.A. 54:5-113) in 1927 to address this situation. This law authorizes the private sale of tax certificates plus any liens accruing after the assignment on the property for an amount at least equal to the liens, except when the liens exceed the assessed value of the property in which case the sale price must be at least equal to the assessed value.

In 1941 another act was passed (N.J.S.A. 54:5-114.1) to address situations where the amount of the liens and the assessed value of the property was greater than its fair market value. This act permitted both private and public sales of tax certificates. Finally, in 1943, the legislature passed another act (N.J.S.A. 54:5-114.2), which was essentially the same as the 1941 act except that it included subsequent liens in the assignment.

The 1943 law also had an added feature, returning the property to the tax rolls, which was accomplished by requiring the purchaser to foreclosure the equity of redemption within two years of the assignment or risk losing the amount paid for the assignment (N.J.S.A. 54:5-114.4).

The latter two laws spell out procedures for assigning the liens. In a public sale, notice must be posted in five public places and published in a local newspaper in each of the two weeks before the week of the sale. The notice must describe the parcels on which the assignment is to be made; the name of their owners; the amount required for redemption, including interest and costs; and the time and place of the sale. A copy of the notice must also be mailed to owners whose addresses are known. Assignments are made to the highest bidder, subject to approval by the municipality's governing body.

In a private sale, the town's governing body can decide by resolution which liens to assign for less than the total amount due on them. After it makes this determination it must post notice informing prospective bidders of the private sale and describing the parcels, owners, and amounts required for redemption. After receiving a satisfactory bid, the town must publish a newspaper notice that includes the bid amount and a statement that the governing body plans to accept or reject it at its next meeting. This notice must also contain the same information on parcels, owners, and redemption amounts that was in the first notice. This notice must be published one week before the meeting. At that meeting, the governing body may accept or reject any bid contained in the notice or may entertain and accept other bids made at that time.

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