In New Jersey, unpaid property taxes become a lien (a legal claim for unpaid debt) against the property at up to 18% interest. If the property owner does not repay (redeem) the missed property taxes, the township can auction the lien. An investor or the township can bid for the lien at the auction. The lien purchaser becomes the lienholder. If the property owner does not do anything, the lienholder can eventually take ownership of the home and the full home value.

Many properties that go through property tax foreclosure are worth hundreds of thousands more than the tax debt. A home could be worth $200,000 and go into property tax foreclosure for $1,000 in tax debt. If the property owner does not take action, they can lose both the home and the entire value of the property above the tax debt (surplus). Under New Jersey law, the entire $199,000 surplus—above the $1,000 tax debt—goes to the lienholder if the property owner takes no action.

• If the township is the lienholder, a foreclosure lawsuit can be filed after 6 months.
• If an investor is the lienholder, a foreclosure lawsuit can be filed after 2 years (possibly sooner).

The foreclosure lawsuit process allows the lienholder to seek a court final judgment that transfers property ownership from the original owner to the lienholder. The foreclosing lienholder is not suing to take money from you, rather they are suing to take ownership of the property. Generally, the legal process takes about 6-8 months from the initial foreclosure filing until the final judgment of foreclosure. In most cases, after final judgment enters, the lienholder gets full ownership of the property and all of the home value.

Example: The home is worth $500,000 and the tax lien is $10,000. The lienholder can foreclose on the $10,000 tax lien debt and ask the court for a final judgment. When final judgment enters, the lienholder gets ownership of the home. Under current New Jersey law, after final judgment the lienholder does not have to pay any money back to the original owner. The lienholder keeps the extra $490,000 in surplus home value. 

Property owners can prevent or resolve property tax foreclosure. It is important for property owners to know their rights and understand the legal process.

(1) Know Your Rights Before a Foreclosure Lawsuit is Filed

Before a foreclosure lawsuit is filed, owners have the right to repay the missed payments directly to the township tax collector. The owner usually must also pay up to 18% interest on the tax debt. The repayment (redemption) will cancel the tax lien.

Step 1: Property owner falls behind on property tax payments.

If you miss property tax payments – including water and sewer tax payments – this becomes a lien against the property with interest.

Step 2: Township auctions the tax debt.

If the property taxes are not repaid, the township will auction the unpaid tax lien to a bidder. The auction usually occurs in the fall or the winter of the same calendar year. An investor can buy the lien and, in some cases, they will pay extra money (a premium) to buy the lien. If an investor does not buy the lien, then the township may buy the lien. The township does not send any specific notice to the owners that a lienholder purchased the lien.

A property owner may contact the township to confirm if a tax lien was auctioned for their property, and may check the county public records.

Step 3: The lienholder might send a Notice of Intention to Foreclose.

Sometimes, a lienholder sends the owners a Notice of Intention to Foreclose at least 30 days before filing the foreclosure lawsuit. The notice informs owners of the amount due to redeem the tax lien. The notice may also inform owners that they can request a sheriff’s sale.

(2) Know Your Rights After a Foreclosure Lawsuit is Filed

After a foreclosure lawsuit is filed, owners may still have the right to repay the missed payments directly to the township tax collector and stop the foreclosure.

It is critical that owners take action to resolve or prevent tax foreclosure. Filing a sheriff’s sale demand in the foreclosure should guarantee additional rights and legal options to protect surplus equity value. Please read the section below called (3) Property Owner Rights.

Step 1: Plaintiff files a foreclosure complaint.

The legal foreclosure process formally begins when the plaintiff (lienholder) files a foreclosure complaint against you—the defendant (property owner, owner’s heirs, or judgment creditors)—in court.

The foreclosure is not a lawsuit against you for money. The foreclosure complaint allows the plaintiff to ask the court for title to your home (through final judgment) in order to repay the lien with interest and lawful fees.

The complaint lists all of the facts that give the plaintiff the legal right to foreclose.

Step 2: Plaintiff serves you with a summons and complaint.

Usually, the plaintiff must attempt to hand-deliver (“personally serve”) a copy of the summons and complaint to you at your primary residence.

If the plaintiff is unable to “personally serve” you or other defendants, they can serve through regular and certified mail.

If both the regular and certified mail is returned or the plaintiff cannot find a good address for you or other defendants, it will ask the court for permission to serve by publication in a newspaper. If this happens, you may not receive important legal notices by mail. Instead, the notices will only be published in the newspaper.

Step 3: You may file an answer. Your rights at this stage should be reviewed with an attorney.

Your rights at this stage depend on what type of foreclosure complaint was filed against you, and what your relationship is to the property.

If you cannot afford to hire an attorney, you may be eligible for free legal assistance from the LSNJLAW^SM Hotline. Apply online at www.lsnjlawhotline.org or by calling 888-LSNJ-LAW (888-576-5529).

• If the plaintiff is a township, usually the case is “in rem” and you have the right to file an answer within 45 days of service. If you do not file an answer or do anything within 45 days, the township can obtain final judgment soon after.
• If the plaintiff is an investor, usually the case is “in personam” and you have the right to file an answer within 35 days of service. If you do not file an answer or do anything within 35 days, in most cases the investor must file at least two more legal motions in the case before it can get a final judgment.
• In some cases, the plaintiff is an investor and files an “in rem” case that may require you to take action very quickly in order to prevent final judgment from entering.

Legal defenses could prevent the foreclosure from going through to final judgment. Please speak with an attorney to find out what legal defenses and options may be available for you.

(3) Property Owner Rights

If you are a homeowner who is behind on property taxes, you have rights! You can potentially save the home from foreclosure, or at least recover the home value that exceeds the tax debt.

If the court HAS NOT entered a final judgment of foreclosure, you can:

• Redeem (repay) the tax debt plus interest and lawful fees in one of the following ways.
• Apply for a grant. Funds may be available through NJ ERMA. Call 2-1-1 or visit https://www.nj211.org for other potential funding resources.
• Apply for a regular bank loan, mortgage, or line of credit. Be sure to work with a trusted lending institution. There are scam lenders who target people who are in foreclosure and try to steal their homes or their home equity value.
• Use savings or ask for financial help from family and friends.
• Repay the tax arrears debt over 5 years in Chapter 13 bankruptcy.
• If you can’t afford to repay the tax debt, you can list the property for sale through a realtor to maximize the amount of home value you can recover.
  You should speak with an attorney to make sure that the Court is notified of the private sale and that there are no objections to the sale.

• Request a sheriff’s sale to preserve surplus equity. Requesting a sheriff’s sale before final judgment enters will ensure that your property goes to an auction to preserve surplus equity. You should file the sale demand for surplus equity if you believe the property is worth more than the tax lien debt or if you are unsure; otherwise, you may lose your right to the surplus amount. While the sale demand should preserve at least some surplus equity, it may not guarantee your ability to recover the full home value.
  
  To file the demand using the NJ Court electronic online filing system, follow the steps listed below.
  
  Step 1: Download the correct template below based on your relationship to the property:

  N.J.S.A. 54:5-87b – Defendant Demand for Sheriff’s Sale (owner)
  N.J.S.A. 54:5-87b – Defendant Demand for Sheriff’s Sale (heir)
  N.J.S.A. 54:5-87b – Defendant Demand for Sheriff’s Sale (estate administrator)
  
  Speak with an attorney if you are unclear about your legal interest in the property or which template is the correct one to use.

  Step 2: Fill in your information in the template. You will need to use the case docket number listed on the foreclosure papers that you received.
  
  Step 3: Create an account with the NJ Courts Judiciary Electronic Document Submission (JEDS) system. More information on JEDS is available on the NJ Courts website.
  
  Step 4: Once a JEDS account is created, file your sheriff’s sale demand. If you have questions about how to file using JEDS, contact the NJ Courts Help Desk.
  
  After you file the sheriff’s sale demand, you should have at least a few more months to figure out a plan to repay the tax arrears—either with financing through a lender or a reverse mortgage, or some other method.

If the court HAS entered a final judgment of foreclosure, you can:

• Speak to an attorney as soon as possible.
• Although it may be too late to file a sale demand, you may have a right to demand that the Plaintiff repay you for any taken home equity value above the tax debt.
• Also, you may have a right to ask the court to “cancel” the final judgment and recover ownership of the property.

This information last reviewed: Apr 27, 2026