It seems that more and more each week I take phone calls from third-party purchasers or must defend my clients from third-party purchasers who are trying to take the Florida Foreclosure Sale Surplus Funds. What actual right do third-party purchasers of the property have in a Florida Foreclosure Sale Surplus Funds case? The short answer is, they don’t.
A third-party purchaser is a person or company who purchased the property at a foreclosure auction. This foreclosure auction could have been from a foreclosure case brought on by the mortgage lender, or it could be from any number of subordinate lienholders, like a homeowner’s association or second mortgage holder. Often, the purchaser at the foreclosure sale has paid much more than what was owed to the plaintiff, and this resulted in Florida Foreclosure Sale Surplus Funds. These surplus funds, by Florida law, are to be given first to any subordinate lienholder (who has timely filed a claim) and second, they are to be paid to the person(s) who owned the property at the time the foreclosure case was originally filed.
Florida Statute 45.032(1)(a) 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.” Any third-party purchaser at the foreclosure sale does not in any way fit this definition of the “owner of record”. In fact, many courts have deemed these purchasers as a “purchaser pendente lite”. The technical definition of a purchaser pendente lite is “a person who bought property while that property was in litigation.” After the foreclosure sale is completed, the only litigation that is remaining on the case is the distribution of the Florida Foreclosure Sale Surplus Funds (if any) to the proper parties. Most courts have decided that a purchaser pendente lite is not entitled to intervene in the foreclosure case, let alone at the very end of the case.
This is slightly different if there is a second foreclosure case currently pending or could be filed in the near future though. For example, if a third-party purchaser bought the property at a homeowner’s association foreclosure sale, and there is also still a mortgage on the property, then as the new owner they may have to try to defend the second foreclosure case long enough to work something out with the lender because when they bought the property, they did so “subject to” the mortgage on the property. This mortgage is superior to any liens by a homeowner’s association or even a second mortgage. In that case, the courts will allow them to file pleadings to defend the case and to try to work out a payoff with the lender. I have not yet seen a third-party purchaser “win” against a mortgage foreclosure.
All of that being said, it still doesn’t give a third-party purchaser any right to surplus funds unless they were the party on the title prior to, or at the time of, the filing of the lis pendens by the mortgage lender. At that point, and that point only are they the owner of record on the new case. They will not be allowed by Florida Statute or case law to retrieve any of the Florida Foreclosure Sale Surplus Funds from a foreclosure sale where they are the ones who bought the property. The best way for purchasers to protect themselves from buying a property that has current mortgage on it is to do a title search. Running a title search on a property is relatively inexpensive and that low cost can save tens or even hundreds of thousands of dollars in the future.
The fact that the law is absolutely clear when it comes to third-party purchasers doesn’t seem to deter many of them from attempting to receive those surplus funds. This means that if you are due Florida Foreclosure Sale Surplus Funds as the actual owner of record and a third-party purchaser is attempting to illegally retrieve those funds, you will need a competent attorney to represent you. I will fight to make sure these baseless claims go unfulfilled, and you get the maximum amount of surplus funds you have coming to you. 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.