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Florida Foreclosure Surplus Funds - What Can a Third-Party Purchaser Do to Disrupt Your Surplus Case?

I represent clients all over the state of Florida in Foreclosure Surplus Funds cases. It seems that more and more that Third-Party purchasers are trying to find a way to get at some of those funds that don’t belong to them. But if those funds don’t belong to the third-party purchaser, how is it they can hold up the case?

First, I should explain what a third-party purchaser is. This is the person who purchased the property at a foreclosure sale. This is the person or company that actually created the surplus funds by paying more than what the original owner owed to the lender. The Lender and Original Owner are the first and second parties. The person or company that purchases the property at auction is the “third-party purchaser.” Many of these third parties will see the Certificate of Disbursements come through after the sale and see that there is a surplus. They then think they can get some of their money back. This is not true at all.

Florida Statute 45.032(2) states in relevant part, “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 any Florida Foreclosure Surplus Funds will first go to any subordinate lienholders that have “timely” filed a claim. After they are paid, then the remaining funds go to the person who owned the property at the time the foreclosure case was filed. Nowhere in that statute does it say that anyone who purchases the property can get their money back. This is even true if the third-party purchaser buys the property from an HOA foreclosure sale not knowing that there is still a First Mortgage encumbering the property’s title.

One of my favorite cases that spells these rules out for us is called Pineda v. Wells Fargo from Florida’s Third District Court of Appeals. Here, the court stated that “the fact remains that distribution of surplus foreclosure proceeds is governed by a plain and unambiguous statutory procedure which clearly provides that the owner of record is entitled to the surplus proceeds.” The court also states, “neither the statutes nor the case law governing distribution of surplus foreclosure sale proceeds provides a mechanism authorizing a third-party purchaser to obtain the surplus.”

Now this seems like very settled law. However, all the time I have to defend my client’s Florida Foreclosure Surplus rights in court against these third-party purchasers. This is because they are extremely distraught, they either they bought the property without researching the title, or they are upset that they may have overpaid for the property. Either way, they are not entitled to the Florida Foreclosure Surplus Funds.

The next way they can try to slow the case down is by stating they need the money to pay down the first mortgage lien that may still be on the property. I have seen them try to appeal a lower court’s decision. However, there are some great legal opinions out there from various courts here in Florida. One called YHT & Assoc. v. Nationstar Mortgage, specifically states. “because Appellants were non-parties in the action and were not included in the final judgment, they are considered legal strangers to the action and, as such, have no legal standing to appeal that final order.” This means that since the third-party purchaser was not a party to the original foreclosure case, they are not allowed to intervene in any further proceedings.

Again, this seems like very settled law, but it takes time to defend against these cases. This is also why it is absolutely necessary to hire a qualified Foreclosure Surplus and Tax Deed Surplus Attorney. You need someone who knows the law and is always looking out for your best interests. If you believe you may have Florida Foreclosure Surplus Funds from a foreclosure sale and you know someone has purchased the property at a foreclosure auction is now attempting to retrieve your surplus funds, give me a call for a free consultation. I handle Foreclosure Surplus and Tax Deed Surplus Funds in every County in the State of Florida, and I don’t get paid unless you do.

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