There are changes in the Statutes regarding Tax Deed Auctions and the handling of the Surplus. These changes apply only to those records with tax deed applications filed after October 1, 2018.
The first section below shows how the statute was before change and towards the bottom, we have screenshots and explanations for the changes.
Disbursement of proceeds of sale (Excess, Overbids, Surplus)
Here, we explain in more simple terms what the Statute means for the disbursement of surplus from a tax deed sale. Everything in green is our explanation.
197.582 Disbursement of proceeds of sale.—
(1) If the property is purchased by any person other than the certificate holder, the clerk shall forthwith pay to the certificate holder all of the sums he or she has paid, including the amount required for the redemption of the certificate or certificates together with any and all subsequent unpaid taxes plus the costs and expenses of the application for deed, with interest on the total of such sums for the period running from the month after the date of application for the deed through the month of sale at the rate of 1.5 percent per month. The clerk shall distribute the amount required to redeem the certificate or certificates and the amount required for the redemption of other tax certificates on the same land with omitted taxes and with all costs, plus interest thereon at the rate of 1.5 percent per month for the period running from the month after the date of application for the deed through the month of sale, in the same manner as he or she distributes money received for the redemption of tax certificates owned by the county.
^^When payment is received by the third-party winning bidder, the certificate holders are paid first.
(2) If the property is purchased for an amount in excess of the statutory bid of the certificate holder, the excess must be paid over and disbursed by the clerk. If the property purchased is homestead property and the statutory bid includes an amount equal to at least one-half of the assessed value of the homestead, that amount must be treated as excess and distributed in the same manner.
^^ Just because you see something like “Starting Bid $50,000 and Ending bid $50,100” does not mean there is only $100 in surplus. If that property is homestead property, the opening bid includes half of the amount of the assessed value but that 1/2 IS included as part of the surplus amount.
Late Property Taxes: $5,000
Homestead Property Value: $100,000
Starting Bid will be: $55,000 (Amt of Taxes PLUS 1/2 assessed value)
Property sells at auction for: $55,100
You may glance at that and say ‘Surplus is only $100 – definitely not worth pursuing’
However, the surplus is actually $50,100 because THAT is the amount the property sold for over and above the amount due in property taxes.
HERE IS AN ACTUAL EXAMPLE FROM ST. LUCIE COUNTY
At the top, there is a screenshot of a tax deed auction result. Below that is the Notice of Surplus the county mailed out.
The clerk shall distribute the excess to the governmental units for the payment of any lien of record held by a governmental unit against the property, including any tax certificates not incorporated in the tax deed application and omitted taxes, if any. If the excess is not sufficient to pay all of such liens in full, the excess shall be paid to each governmental unit pro rata.
^^Governmental entities are superior lien holders and are paid first out of any overbid amount. These include liens/judgments you see owed to the city, county or IRS.
If, after all liens of governmental units are paid in full, there remains a balance of undistributed funds, the balance shall be retained by the clerk for the benefit of persons described in s. 197.522(1)(a) (Previous Home Owner of Record at time of auction), except those persons described in s. 197.502(4)(h) (Contiguous Property Owners/neighbors of property), as their interests may appear.
^^Previous Owner has a stake in the excess proceeds. Neighbors of property do not. They notify neighbors because their property MAY have some sort of overlap with the property that is about to be auctioned off. However, that neighbor has no claim in any surplus money from the tax deed sale.
The clerk shall mail notices to such persons notifying them of the funds held for their benefit. Such notice constitutes compliance with the requirements of s. 717.117(4). Any service charges, at the rate prescribed in s. 28.24(10), and costs of mailing notices shall be paid out of the excess balance held by the clerk.
^^Clerk Of Court must notify previous owners and lien holders notification of the auction.
Excess proceeds shall be held and disbursed in the same manner as unclaimed redemption moneys in s. 197.473. For purposes of identifying unclaimed property pursuant to s. 717.113, excess proceeds shall be presumed payable or distributable on the date the notice is sent. If excess proceeds are not sufficient to cover the service charges and mailing costs, the clerk shall receive the total amount of excess proceeds as a service charge.
^^Costs incurred by the Clerk of Court concerning the tax deed sale, including postage and services charges, are deducted from the surplus money.
(3) If unresolved claims against the property exist on the date the property is purchased, the clerk shall ensure that the excess funds are paid according to the priorities of the claims.
^^Clerk has a duty to disburse the overbid monies from the Tax Deed Auction to lien holders and previous owners
If a lien appears to be entitled to priority and the lienholder has not made a claim against the excess funds, payment may not be made on any lien that is junior in priority.
^^This is important and the most often confused part of the Statute. The sentence above is talking about LIEN HOLDERS and NOT previous property owners. People mis-read the above and think “Oh well if Wells Fargo does not make their claim, then the previous owner can never put in a claim”. NOT true.
Example and What the above means:
Lets say the property is auctioned off and the high bid was $20,000 over the amount of late property tax. The property has the following encumbrances:
- Mortgage with Bank of America and $15,000 is still owed
- Lien to City of Orlando for $200.00 in lot mowing charges
- Lien to Jack’s Roofing Company for $10,000 unpaid new roof
Counties give lien holders 90 days to put in their claim. Notifications of surplus are sent out to the previous property owner and all lien holders. Since there are multiple liens on the property and especially because the liens all total more than what there is in surplus, the Clerk of Court waits 90 days to give everyone a chance to put in their claim form.
In the above case, the lien to the City of Orlando is the priority lien, they are paid first before anyone else.
Next in line is the mortgage with Bank of America. They have from Day 1 to Day 90 after the end of the auction to put in their claim before the Previous Owner can claim the surplus.
If Bank of America NEVER puts in a claim, then Jacks Roofing can NEVER put in a claim.
THIS is what that part of the statute is talking about.
If a lien appears to be entitled to priority (Bank of America) and the lienholder has not made a claim against the excess funds, payment may not be made on any lien that is junior in priority (Jack’s Roofing).
Previous Owners are NOT lien holders so this line does NOT apply to them. Previous home owners only need to wait the 90 Day period to give ALL lien holders their chance at the surplus first.
But if BOA does put in their claim, they get $15,000 of the surplus money and THEN Jack’s Roofing can claim the other $5,000 of the surplus (even though that is less than what is owed to Jack’s Roofing, it is all they get because that is all that is left of the $20,000 in surplus after BOA gets theirs) … and therefore, nothing would be left for the previous owner.
P.S. VERY OFTEN, Banks do not put in their claim before the 90 days (if at all)… they are huge, there are a LOT of claims for them to deal with on a daily basis, deadlines pass and that all works in the favor of the previous owner.
If potentially conflicting claims to the funds exist, the clerk may initiate an interpleader action against the lienholders involved, and the court shall determine the proper distribution of the interpleaded funds. The clerk may move the court for an award of reasonable fees and costs from the interpleaded funds.
^^The Clerk of Court may initiate a court hearing to help with deciding who gets the surplus.
STATUTE CHANGED IN OCTOBER 2018