N.J. Admin. Code § 5:33-1.1

Current through Register Vol. 56, No. 21, November 4, 2024

Section 5:33-1.1 - Electronic municipal tax lien sales

(a) No municipality may contract with a third-party vendor to conduct tax lien sales that is not a nationally recognized electronic municipal tax lien service. In order to qualify as a "nationally recognized electronic municipal tax lien service," the vendor must presently conduct internet-based electronic municipal tax lien sales in at least two states, or have conducted internet-based electronic municipal tax lien sales in the past two years that have included bidders from more than one state, or affirmatively market a system for performing internet-based electronic municipal tax lien sales in more than one state.

(b) An electronic municipal tax lien sale shall be authorized by a resolution of the governing body.

(c) For any contract for an electronic municipal tax lien service that exceeds the contracting unit's bid threshold, an electronic municipal tax lien service shall not be construed to fall under one of the exceptions to public advertising for bids set forth in N.J.S.A. 40A:11-5, except as set forth under 40A:11-5(3) and 40A:11-5(4).

1. An electronic municipal tax lien service may be procured through competitive contracting pursuant to N.J.S.A. 40A:11-4.1 et seq., without seeking prior approval of the Director of the Division of Local Government Services.

(d) When a municipality conducts an electronic tax lien sale, the tax collector shall continue to prepare the tax lien sale notice required pursuant to N.J.S.A. 54:5-25. In addition to the content required by N.J.S.A. 54:5-25, the notice shall state that the sale is being held through an online auction and that bidders should submit their bids no later than the date and time of the sale set forth in the notice. A full link to the website for tax lien sale bidder instructions and registration shall also be included.

1. The tax lien sale line items shall be available to the public online on the vendor's website without requiring registration, membership, or payment prior to viewing. If the municipality has a website, a copy of the tax lien sale notice shall be posted until the tax lien sale concludes.

2. Pursuant to N.J.S.A. 54:5-26, the municipality shall physically post copies of the tax lien sale notice prepared pursuant to this subsection in five of the most public places in the municipality.

3. Pursuant to N.J.S.A. 54:5-27, when the property owner's name appears in the tax lien sale list and their post office address is known, the municipality shall mail to the property owner at that address, postage prepaid, a copy of the tax lien sale notice prepared pursuant to this subsection. Failure to mail the notice shall not invalidate any proceeding under this section.

(e) The newspaper publication requirement set forth in N.J.S.A. 54:5-26 may be satisfied by publishing, in lieu of a copy of the tax lien sale notice prepared pursuant to (d) above, a notice published in the format of a display advertisement, rather than a legal advertisement. The display advertisement, which must be no less than two inches by three inches with a bold black border, shall be published once a week for four weeks, prior to the week of the sale in a newspaper circulating in the municipality which is its official newspaper. The notice contained in the display advertisement shall set forth the following information:

1. A statement that the municipality is announcing the sale of delinquent taxes and delinquent municipal charges;

2. A statement that the sale shall be conducted through an online auction;

3. A statement that the listing of all parcels and delinquencies and costs, along with bidding instructions, are available online for viewing at no cost;

4. The date and time of sale; and

5. The full website link where the tax lien sale line items may be viewed.

(f) Notice to the property owner and to any person or entity entitled to notice of foreclosure pursuant to section 20 of P.L. 1948, c. 96 (N.J.S.A. 54:5-104.8) may be given by regular or certified mail in lieu of any two publications required pursuant to (e) above. In addition to costs of sale provided in N.J.S.A. 54:5-38, the costs of such notice or notices shall be added to the cost of sale pursuant to N.J.S.A. 54:5-26, not to exceed $ 25.00 for each notice for a particular property. The notice or notices to the property owner shall contain the information required pursuant to (d) above. Failure of the property owner to receive a notice properly mailed by the tax collector shall not constitute grounds to void the subsequent tax lien sale.

(g) The vendor's fee for conducting the electronic tax lien sale shall not exceed the fee collected by the tax collector under N.J.S.A. 54:5-38. The vendor shall only charge fees to the municipality and not to bidders or lien purchasers.

(h) The tax collector shall not collect any additional fees for the cost of sale, except as otherwise permitted pursuant to law.

(i) Bidding shall open no earlier than upon publication of the tax lien sale notice prepared pursuant to (d) above or the display advertisement prepared pursuant to (e) above.

(j) Bidder registration shall be online and completed prior to submitting a bid, although the municipality shall have the discretion to permit in-person registration with the tax collector's office.

(k) Before any bidder can place a bid, the bidder will be required to post a forfeitable deposit .

1. At the tax collector's discretion, deposits may be given in person at the municipality's office.

2. Deposits shall be held by the municipality and not the vendor.

3. If a bidder shall fail to make a payment on a lien certificate that such bidder has won upon conclusion of the sale, the deposit amount shall be forfeited to the municipality.

4. The tax collector shall ensure that any unused portion of the deposit will be promptly returned to the bidder after the conclusion of the sale.

(l) An electronic municipal tax lien sale system shall provide:

1. Online bidder registration, including the ability to obtain and electronically submit forms, such as bidder information sheets and W-9s.

2. Detailed online instructions on how to use the system's website.

3. Help desk support for tax collectors and bidders through the internet, e-mail, and at least one toll-free telephone number. A dedicated telephone hotline shall be made available to tax collectors for use until the sale has been completed.

4. Web-based training, including online tutorials, for both bidders and those municipal officers and employees responsible for administering the tax lien sale. The vendor shall supply a method for bidders to practice bidding.

5. Available in-person training, including a working demonstration of the website and overall system, for tax collectors and other municipal employees involved in the tax lien sale process.

6. Online display of winning bids immediately upon completion of the auction.

7. Notification to winning bidders by e-mail at the bidder's registered e-mail address.

8. Access for the tax collector to remove and update the tax lien sale list in real time.

9. Access for the tax collector to review a detailed history of all funds transferred, as well as a transaction log of all bid submissions and results.

10. Provision for the electronic transfer of information and data from and to the municipality.

11. A standard complaint procedure for both the municipality and bidders. The complaint procedure shall require that a complaint log be maintained, which shall be available to the municipality for inspection.

(m) All bid information and participant financial data is deemed property of the municipality.

(n) No officer, employee, or independent contractor of the vendor may participate in the auction.

(o) Bid amounts shall not be visible to the public or to the municipality while the auction is in process.

(p) All liens shall be auctioned individually, such that a bid will be placed on each lien with a winning bidder determined for each lien. The bulk sale of liens is prohibited.

(q) The electronic municipal tax lien service shall give the tax collector the ability to accept and process payments by ACH transfer, bank wire transfer, certified check, or cash. Cash payments may be accepted in person by the tax collector; however, the tax collector must immediately input data into the electronic tax lien sale system to reflect any such payment. Payment must be made within 24 hours after the bidding is closed.

1. For ACH transfers, the transfer must be initiated within 24 hours after the bidding is closed and settled within 72 hours of the close of sale, unless a longer period of time has been agreed upon in writing between the municipality and the vendor.

2. The vendor shall notify all registered bidders of any properties that are available for bidding due to non-payment. If a parcel is resold, interest shall be recalculated to the date of the new sale date.

(r) The following cybersecurity best practice framework shall be followed:

1. The vendor's website and system shall:

i. Be hosted on dedicated servers or in a FedRAMP Moderate Impact Level Authorized Cloud. When using cloud services, the vendor shall check provider credentials and contracts;

ii. Encrypt stored and transmitted financial information and personal identification information;

iii. Maintain only critical personal identification information. Social Security numbers shall not be utilized as identification numbers for system purposes;

iv. Employ a resilient password policy;

v. Undergo regular security updates and stress testing;

vi. Have back up, information disposal, and disaster recovery plans and procedures created and tested;

vii. Undergo regular security risk assessments for detecting compromises; and

viii. Maintain awareness of vulnerabilities, implement necessary patches and updates, and develop a cybersecurity incident response plan.

2. The vendor shall notify the municipality of any cybersecurity incidents they experience, even if the incident did not lead to an actual compromise of data.

3. The vendor's staff shall be educated in good security measures. The vendor shall perform employee background checks on employees with access to financial information and personal identification information stored on the system.

4. The vendor shall have a computer security incident response team (CSIRT) in place.

(s) Vendors shall provide annual evidence of satisfactory internal controls to the municipality's chief financial officer and the tax collector. Such evidence must be in the form of an unqualified auditor's report issued pursuant to the performance of a Service Organization Control (SOC) 2 engagement based upon the existing Trust Services Principles (WebTrust<TM> and SysTrust<TM>) carried out in accordance with AT 101 Standard 1, with the ability to test and report on the design effectiveness (Type I) and operating effectiveness (Type II) of the vendor's controls.

(t) All contracts between a municipality and a vendor shall:

1. Be reviewed and approved by the tax collector prior to the execution of the contract as to the terms, including satisfaction of the requirements of this section;

2. Be awarded by the governing body, notwithstanding the value of the contract;

3. Contain adequate provisions to indemnify the municipality against any losses incurred as a result of the actions or inactions of the vendor;

4. Require the vendor to be responsible for the errors and omissions of its employees or agents; and

5. Upon reasonable notice, require the vendor to allow an independent auditor to examine its internal controls applying SSAE No. 16 and AT 101 standards, or WebTrust<TM> and SysTrust<TM> standards. The municipality shall have the discretion to agree to compensate the independent auditor. Upon completion, the independent auditor's report shall be provided to the tax collector, chief financial officer, and governing body and shall be for internal use only.

(u) All disputes between the parties and disputes concerning the contract or its operation shall be in writing and forwarded to the other party via registered or certified mail. New Jersey law shall govern the contract and the relationship between the municipality and the vendor. All contracts shall have appropriate provisions for:

1. Dispute resolution between the parties;

2. Service of process to the vendor; and

3. Application of New Jersey law.

(v) The duration of any contract between a municipality and a vendor shall not exceed one year, notwithstanding any provisions of the Local Public Contracts Law to the contrary. Contracts for electronic tax lien sale systems shall not be considered data processing service contracts under N.J.S.A. 40A:11-15(5).

(w) All contracts entered into between the municipality and a vendor shall be in writing, executed by all parties, and have appropriate provisions for termination of the contract, including, but not limited to, termination for failure to perform on the part of the vendor.

(x) The tax collector shall allow the Director of the Division of Local Government Services access to online reports of any electronic municipal tax lien sale. The Director of the Division of Local Government Services may require any tax collector and vendor conducting an electronic tax lien sale to provide a report with information on the sale including, but not limited to:

1. The date and time of sale;

2. Number of line items;

3. Agreed upon fee to the vendor, subject to the limitations set forth in (g) above;

4. A weblink to the auction site; and

5. Auction results.

N.J. Admin. Code § 5:33-1.1

Adopted by 50 N.J.R. 144(a), effective 1/2/2018