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Foreclosure Surplus Funds from an HOA or COA Sale - Some Helpful Tips

During the current pandemic, many homeowners have been out of work. Some of them have been able to hold off on foreclosure from their lenders due to the moratorium on foreclosures on federally backed loans. But many Homeowner’s and Condo Owner’s Associations are not as understanding. If you get too far behind on paying those assessment fees, your HOA or COA can and will file a foreclosure case against you. This can be incredibly distressing and if you do nothing about it, your home could be sold at a Florida Foreclosure Sale. Additionally, if a family member has passed away due to the Covid-19 pandemic, then the family members might not know to pay those past due assessments and the HOA or COA will foreclose.

If this happens, there could still be an upside that could net you thousands of dollars. When the Florida Foreclosure case comes to a conclusion, and the association wins, the judge will sign the final judgment and enter a final amount due and set a sale date. If the final amount due for the past due assessments (including all other fees associated with the case) is for instance $10,000 then that is the minimum that is needed to purchase the property. Many investors will come in and try to buy the property at the Florida Foreclosure Auction. Please keep in mind that what is owed for the assessments has nothing to do with what the property may be worth or whether or not there is a mortgage (or other liens) still associated with the property.

An investor may come in and pay $50,000 (could be more or less as long as it pays off the association) for the property. This could mean there is $40,000 in surplus funds after the association is paid what it is owed. If there are any subordinate lienholders that make a timely claim, they will get paid. If there are no subordinate lienholders, then that surplus belongs to you. Florida Statute 45.033(1) states, “There is established a rebuttable presumption that the owner of record of real property 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 is also true of family members of deceased persons. This is due to Florida Statute 45.033(2)(b) states, “An involuntary transfer or assignment may be as a result of inheritance.” If you have inherited the ownership of the property, you are also entitled to the surplus funds.

I want to point out that if there is still a mortgage on the property, the lender for that mortgage is not entitled to the Florid Foreclosure Surplus Funds from the association’s foreclosure sale. The reason for this is that a Florida Foreclosure Sale from an HOA or COA does not extinguish the mortgage from the purchase money lender. The lender will have the right to bring its own foreclosure case whenever it decides to, which means the new third-party purchaser could be on the hook for the new foreclosure proceedings. This is because the mortgage lien is attached to the property.

A third-party purchaser is also not able to receive the Florida Foreclosure Surplus Funds from this foreclosure sale. No, they cannot get their money back after they overpaid for what was owed for the assessments. There is no statute or case law that allows for this and the third-party purchaser should have done its due diligence to see if there were any other liens or mortgages on the property before buying the property at auction.

Bottom line when it comes to Florida Foreclosure Surplus Funds remaining from a HOA or COA foreclosure sale is that you need to hire an experienced Attorney who will fight hard to make sure you get the most out of those surplus funds. I know all of the little nuances of the law when it comes to Florida Foreclosure Surplus Funds and can help you get these funds when you may need them the most. Please give me a call for a free consultation. I handle Foreclosure Surplus Cases in every County in the State of Florida, and I don’t get paid unless you do.

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