Foreclosure victims may be able to collect money from the lender that sued them for foreclosure even if they lost the foreclosure lawsuit. How? Under Florida Statute 45.032, if your home is sold at the foreclosure sale for a higher amount than the amount you owed on the mortgage (or to the Condo Association for condo fees and assessments), then you have a right to be paid the “foreclosure surplus funds.”
What are Foreclosure Surplus Funds?
The Florida legislature defines “Surplus Funds” as “the funds remaining after payment of all disbursements required by the final judgment of foreclosure and shown on the certificate of disbursements.” Florida Statute 45.032(1)( c).
This means that the foreclosure must be completed, and the home sold at the foreclosure sale to cover the outstanding mortgage debt as detailed in the court’s judgment. If the sales price on your former residence is more than the total amount due as defined in the judgment, then there are “surplus” funds.
Note: Any proceedings regarding surplus funds in a foreclosure case do not in any manner affect or cloud the title of the purchaser at the foreclosure sale of the property. Florida Statute 45.032 (5).
Foreclosing Party Does Not Get a Windfall
There is a reason for this law being passed by the Florida Legislature. Under public policy, it is not considered fair or equitable for the bank that forecloses on the home to profit from its actions. Foreclosure actions exist to protect lenders from suffering losses when home loans default. These actions are not allowed as profit-making enterprises for the banks.
The foreclosing party does not get a windfall here. If there is extra cash after the foreclosure judgment is paid in full, then the lender does not get to keep it.
Who Gets the Surplus Funds from a Florida Foreclosure Sale?
Under Florida Statute 45.032, it is the “owner of record” who is entitled to be paid the surplus funds.
Before the money is released, there must be legal confirmation that this person meets the statutory definition of an “owner of record.” This is the person whose name appears on the Notice Of Lis Pendens filed by the lender as part of its foreclosure proceeding. See Florida Statute 45.032(1)(a).
For more on notices of lis pendens, read: What Is A Florida Lis Pendens?
Assignment of Rights to the Funds
On occasion, there may be a challenge to the “owner of record” being able to collect these surplus funds after the foreclosure sale. While the law creates a “rebuttable legal presumption” that the owner named on the lis pendens notice is the rightful person to get the money, sometimes another party may have the right to them.
This may be someone who has been assigned the foreclosure surplus funds by the owner of record. This is the “assignee of the rights” and they must prove to the court that they are entitled to the surplus funds.
This is done in an open hearing before the foreclosure court, where the judge considers the assignment itself. The assignment is a legal document. It must meet the requirements of Florida Statute 45.033 in order for the judge to allow the person claiming under the assignment to receive the foreclosure surplus funds. Florida See Florida Statute 45.032(2).
Before the passing of Florida Statute 45.032, the law held that the foreclosure surplus funds were the legally those of the owner of the property on the date of the foreclosure sale. The Florida Legislature passed this law, creating the “rebuttable legal presumption” with its assignment exception, to change things. Id.
Hearing over Conflicting Interest in the Foreclosure Sale Proceeds
There may be challenges to the right of the person claiming the Foreclosure Surplus Funds as the owner of record. Sometimes, they appear independently. Sometimes, the owner of record may acknowledge others as possibly having a right to part of the foreclosure surplus.
Either way, there must be a hearing before the judge to decide who has a right to the money. This hearing must take place within the 60 day window where the clerk holds the foreclosure surplus funds pursuant to the statute.
This is an evidentiary hearing. The challenge may be brought by an assignee or by a subordinate lienholder.
- Any assignee claiming a right to part or all of the surplus funds must provide admissible evidence of that right to the judge. It is the burden of proof of the party claiming against the owner of record’s right to all the surplus funds to demonstrate their legal right to it.
- Any subordinate lienholder claiming a right to the foreclosure surplus funds can move for a summary judgment by the court. This summary judgment motion can be granted at a separate hearing, or at the evidentiary hearing.
The judge will consider the factors set up in Florida Statute 45.033 when deciding the rights of any person other than a subordinate lienholder.
Time Frame for Getting the Foreclosure Surplus Funds
The county clerk in charge of financial transactions oversees the payment of the foreclosure surplus funds for foreclosure sales held within the county’s jurisdiction. For sixty (60) days, the clerk cannot distribute this money.
The clerk is legally bound to hold the foreclosure surplus funds until he or she gets a court order on how the money is to be distributed. See Florida Statute 45.032(3).
This two month period gives any subordinate lienholder the opportunity to appear before the court and argue a right to all or part of the surplus funds. If the 60 days pass without any lienholder coming forward to claim the money, then the law provides that the court must order the clerk to move forward with distribution.
Procedure with the Clerk’s Office for Disbursement of Foreclosure Surplus Funds
The clerk must (1) deduct any applicable services charges and then (2) pay the remaining balance to the owner of record. The owner of record has to prove his or her identity to the clerk’s satisfaction before the disbursement will take place.
Florida Statute 45.032(3)(a) includes a form for the owner of record to use in filing for the disbursement of the foreclosure surplus funds. It is filed in the foreclosure lawsuit and entitled “OWNER’S CLAIM FOR MORTGAGE FORECLOSURE SURPLUS.” Go here to see the form itself.
Included in this form are the following sworn statements:
- I (we) do not owe any money on any mortgage on the property that was foreclosed other than the one that was paid off by the foreclosure.
- I (we) do not owe any money that is the subject of an unpaid judgment, tax warrant, condominium lien, cooperative lien, or homeowners’ association.
- I am (we are) not currently in bankruptcy.
- I (we) have not sold or assigned my (our) right to the mortgage surplus.
- My (our) new address is: .
- If there is more than one owner entitled to the surplus, we have agreed that the surplus should be paid jointly, or to: , at the following address: .
- I (WE) UNDERSTAND THAT I (WE) AM (ARE) NOT REQUIRED TO HAVE A LAWYER OR ANY OTHER REPRESENTATION AND I (WE) DO NOT HAVE TO ASSIGN MY (OUR) RIGHTS TO ANYONE ELSE IN ORDER TO CLAIM ANY MONEY TO WHICH I (WE) MAY BE ENTITLED.
- I (WE) UNDERSTAND THAT THIS STATEMENT IS GIVEN UNDER OATH, AND IF ANY STATEMENTS ARE UNTRUE THAT I (WE) MAY BE PROSECUTED CRIMINALLY FOR PERJURY.
Missing Owner of Record: The Search by the Surplus Trustee
If there is no one coming forward to claim the foreclosure surplus funds during the 60 day period, then the clerk must take steps to make sure reasonable efforts are made to find that owner of record.
When the foreclosure surplus funds go unclaimed, then the clerk must request the court appoint a Surplus Trustee to handle things. The person appointed will be found from a list of qualified surplus trustees pursuant to Florida Statute 45.034.
After the Surplus Trustee is appointed, the clerk prepares a Notice of Appointment of Surplus Trustee The form of the notice is found in Florida Statute 45.032(3).
The language includes:
- confirmation the court clerk has disbursed the foreclosure sale proceeds pursuant to the final judgment in the foreclosure lawsuit;
- there remains a surplus fund in a stated sum;
- the foreclosure surplus funds are subject to disbursement to the owner of record;
- the appointed surplus trustee is charged with finding the owner of record in order for the clerk to disburse the surplus, after deducting costs, to the owner of record.
Unclaimed Foreclosure Surplus Fund Money
The surplus trustee has one (1) year to find the owner of record who is entitled to the foreclosure surplus funds. If the owner cannot be found within one year’s time, then by law the appointment of the Surplus Trustee terminates.
The clerk:
(1) Notifies the surplus trustee that his or her appointment was terminated by operation of law; and
(2) After thirty (30) days have passed from this termination, the clerk treat the remaining funds as unclaimed property.
As with other unclaimed property, the foreclosure surplus funds are then deposited with the Chief Financial Officer, pursuant to Chapter 717 of the Florida Civil Practice and Procedure Code.
Foreclosure Lawyer Can Help With Surplus Funds
Getting help from an experienced Florida foreclosure lawyer is important to learn about your legal rights regarding foreclosure sale proceeds. It may be necessary to litigate your rights to money held by the court as foreclosure surplus.
Owners who have lost their homes in foreclosure may have to defend their rights to their foreclosure surplus fund against claims based upon second mortgages, or liens filed by counties, municipalities, or other government agencies.
Most foreclosure defense lawyers, like Larry Tolchinsky, will offer a free initial consultation to answer your questions.
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