Foreclosure is not really an exciting topic. It definitely isn’t one of those things that you want to bring up to your grandmother when she asks you what’s new in your life at Thanksgiving dinner. Notwithstanding, it is a complex and frustrating issue that is currently impacting many Floridians.
When a property is included as part of an online foreclosure sale, and the amount of the winning bid exceeds what the Plaintiff is owed, there are typically surplus funds remaining which are held by the clerk of the court.
As stated in Fla. Stat. §45.032 (2), there is established a rebuttable legal presumption that the owner of record on the date of the filing of a lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim. This means that the individuals that had title to the property at the time that the Plaintiff filed the foreclosure action and recorded the lis pendens have a very strong argument for entitlement to the surplus funds. I say that there is a strong argument because it is assuming that there aren’t any subordinate lienholders which were named as defendants in the foreclosure action. If there are subordinate lienholders who are paying attention to the case and monitoring the docket, they might also be entitled to the funds. Subordinate lienholders could include judgment creditors and the owners and holders of mortgages that are junior to the mortgage being foreclosed.
Pursuant to Fla. Stat. §45.032 (3)(a), if the owner of record claims the surplus before the date that the clerk reports it as unclaimed and there is no subordinate lienholder, the court shall order the clerk to deduct any applicable service charges from the surplus and pay the remainder to the owner of record. For whatever reason, there are many instances where the owner of record doesn’t participate in the foreclosure action and correspondingly never makes a claim for the surplus funds once the foreclosure sale is completed. Associations can foreclose. Owners and holders of a second or even a third mortgage can foreclose. At the end of the day, regardless of who is foreclosing, if you were the owner of record at the time that the case was filed, you might have an argument to be paid all or a portion of the surplus funds in the clerk’s possession.
Based on the clear and unambiguous language of Fla. Stat. §45.032 (3)(b), if any person other than the owner of record claims an interest in the proceeds prior to the date that the clerk reports the surplus as unclaimed or if the owner of record files a claim for the surplus but acknowledges that one or more other persons may be entitled to part or all of the surplus, the court shall set an evidentiary hearing to determine entitlement to the surplus. Even if a subordinate lienholder makes a competing claim for the funds, it is still worth analyzing what the subordinate lienholder is seeking compared to the total amount of the surplus funds. There might be enough money available to pay the subordinate lienholder in full and still get a partial disbursement of surplus funds.
As stated in Fla. Stat. §45.032 (3)(c), one year after the sale, any surplus remaining with the clerk of the court that has not been disbursed as provided herein is presumed unclaimed as set forth in s. 717.113 and must be reported and remitted to the department in accordance with ss. 717.117 and 717.119, unless there is a pending court proceeding regarding entitlement to the surplus. So, when no claims are made for the surplus funds within one year after the sale, the clerk of the court sends the funds to the Florida Department of Financial Services, Division of Unclaimed Property. If you have a right to surplus funds that were previously remitted to the Florida Department of Financial Services, Division of Unclaimed Property, you can still make a claim for those funds. Additionally, Fla. Stat. §45.032 (3)(c) states that for purposes of establishing entitlement to the surplus after the property has been remitted to the department, only the owner of record reported by the clerk of the court, or the beneficiary, as defined in s. 731.201, of a deceased owner of record reported by the clerk, is entitled to the surplus. Being late to the surplus party isn’t always a bad thing in that, once the funds are sent to the Division of Unclaimed Property, it essentially resolves the issue of subordinate lienholders and their potential competing claims for the funds.
Even if you don’t want to hire a lawyer to defend you in the foreclosure action, at a bare minimum, keep an eye on the docket after the sale to see if there are any surplus funds available. You may be entitled to the cash, but you need to speak up if you want to get paid.