If you aren’t sure what an Installment Contract for the Purchase of Real Property is, you aren’t alone. These are also called an “Installment Land Contract”. Most people don’t know what they are because they are very uncommon, but it basically means it is an agreement that requires the seller to convey legal title (deed) to the purchaser after the purchaser has paid all of the payments for the property. These are generally used as a security device to protect the seller if the purchaser stops paying. This is also sometimes known as “Rent to Own”. But what happens if this property goes into foreclosure and is sold at auction before the purchaser can pay it off and obtain title? If there are any surplus funds, who gets them? The Seller or the Purchaser?
Of course, this is a rare scenario because one would assume that if the seller had a mortgage on the property, the payments made by the purchaser would be used to pay for the mortgage. But sometimes things happen and unfortunately it is the purchaser who will lose on this. The reason goes directly to the main Florida Statute that I like to bring up, 45.032(1)(a). This statute states, “‘Owner of record’ means the person or persons who appear to be owners of the property that is the subject of the foreclosure proceeding on the date of the filing of the lis pendens.” In our scenario, the person who is the owner of record is the person who has title to the property (name on the deed). This is the seller, as the purchaser doesn’t take title until the property is paid for
Unfortunately for the purchaser, this means that they have paid (sometimes for years) to purchase the property, only to have it foreclosed on due to no fault of their own and may not be able to receive any compensation for it. In a recent March 2020 case with Florida’s 2nd District Court of Appeals (Corey v. Neuffer), the court noted “An agreement of deed is deemed to be a mortgage and subject to the same rules of foreclosure as a mortgage.” But they also noted that in a traditional mortgage, the mortgagor (buyer) holds title to the property and that is not the case with an installment contract where it is the mortgagee (seller) who actually holds title. They stated that a contract for deed (wherein the seller agrees to convey title to land after the buyer pays all installment) is merely a security device and is an alternative to an immediate conveyance of the title to the buyer. Under this agreement, the seller “retains legal title to the property until the purchase price is paid.”
The distinctions are quite clear by statute and by case law that the holder of the title (deed) is the person who is to receive the surplus funds. Unfortunately, the legislature has not accounted for Installment Contracts when it comes to Florida Foreclosure Surplus Funds and the courts must abide by exactly what the statute says. In this case the owner of record was still the seller and the buyer had no recourse in obtaining the Surplus Funds.
If your home or a deceased relative’s property has gone to foreclosure sale and you believe you have Florida Foreclosure Surplus Funds available with the Clerk of Court, give me a call for a free consultation. I handle Foreclosure Surplus Funds cases in every County in the State of Florida, and I don’t get paid unless you do.