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Foreclosure Surplus - HOA Foreclosure Surplus and Mortgage Foreclosure Surplus Funds - Can You Get Both? This is a Matter of Good Timing

Sometimes we run into a client who is being sued for foreclosure by both their Homeowner’s Association (HOA) and their Mortgage Lender in separate foreclosure cases. Is it possible that there could be Florida Foreclosure Surplus Funds from both of the Foreclosure cases that you might be eligible to receive? The answer comes down to timing.

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 filed a timely claim.” The most important part of this statute is, “owner of record of real property on the date of the filing of a lis pendens”. For instance, sometimes the HOA will file its foreclosure case and later the mortgage lender will file a separate case. This is done because if the property goes to foreclosure auction from the HOA case, the mortgage lender is not considered to be a subordinate lienholder in the HOA case. The mortgage lender’s rights (purchase money mortgage rights) are generally superior to that of all other lienholders.

But if the HOA forecloses on the property while the owner is still making payments to the mortgage lender, there will be no need for the mortgage lender to file its own foreclosure case. This means that there would be only one foreclosure case at a time. If the property goes to sale from the HOA foreclosure sale and there are Florida Foreclosure Surplus Funds available, the owner gets those funds. However, when that property is sold to a third-party purchaser at the foreclosure auction, that purchaser now becomes the owner of record (with the County Property Appraiser and for Tax Purposes). If the mortgage lender now decides to foreclose after the property has been sold to the third-party purchaser, because the original owner had to move out and no longer owns the property. This could mean that if the property goes into foreclosure a second time and if there are Florida Foreclosure Surplus Funds available after the sale, this new owner is the owner of record and will receive those surplus funds, not the original owner. Seems unfair, but this is strictly a timing issue. Please note that this is the ONLY instance I can think of where a third-party purchaser could ever receive surplus funds. They became the owner of the property PRIOR to the second foreclosure case.

The next scenario is if the HOA foreclosure case and mortgage lender foreclosure case are going on simultaneously. For instance, if the HOA begins their foreclosure case and then a couple of months later, the mortgage lender files its own foreclosure case, then the lis pendens for both cases will have the same original owner of record listed on them. This means that if the HOA completes its foreclosure case first, then there will be a sale of the property from that case. Then a few months later there could be a second foreclosure sale and if there are Florida Foreclosure Surplus Funds available from both cases, the original owner of record is entitled to both. It won’t matter that the property is now owned by someone who purchased it at the HOA sale, what matters is the “owner of record of real property on the date of the filing of a lis pendens”.

All of these scenarios seem a bit confusing to most people, but that is why it is extremely important to hire a qualified Florida Foreclosure Surplus Attorney to handle your potential surplus funds cases. You won’t get the same kind of knowledge from one of those surplus recovery companies. They don’t look at every aspect of the case(s) to see what you may or may not be entitled to.

If you are unsure of your rights to those Florida Foreclosure Surplus Funds from one or more foreclosure sale of your property, give me a call for a free consultation. I handle Foreclosure Surplus and Tax Deed Surplus in every County in the State of Florida, and I don’t get paid unless you do.