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Florida Foreclosure Surplus Funds - Is the Government Entitled to Your Surplus Funds After the Foreclosure Sale?

If the Federal Government has a lien on your property, but fails to file a claim for surplus funds within the 1-year period stated by Florida Statute, can they still make a claim for those surplus funds? I recently had Florida Foreclosure Surplus case that answered this very question. My client was due surplus funds after the foreclosure sale of his property but there was a lien on the property by the Department of Housing and Urban Development (HUD). However, they made their claim more than two years after the foreclosure sale of the property. How could they make a claim for the Florida Foreclosure Surplus Funds so long after the foreclosure sale of the property if Florida Statutes clearly state they only have a year to do so?

Florida Statute 45.032(3)(c) states, “one year after the sale, any surplus remaining with the clerk of the court that has not been disbursed as provided herein is presumed unclaimed.” It further states, “for purposes of establishing entitlement to the surplus after the property has been remitted to the department [of unclaimed funds], only the owner of record reported by the clerk of the court… or the beneficiary of a deceased owner of record… is entitled to the surplus.” This statute seems to be pretty cut and dried. It is not ambiguous in any way. It clearly states that after a year, if no subordinate lienholders have timely made a claim for the surplus, it goes only to the former owner or their heirs. How did HUD win in my case?

What it boils down to is based on their argument, the Federal Government is not bound by any state statute of limitations. They argued that due to their sovereign immunity, the federal government could wait a year, two years, ten years, or however long they wanted, and they would still be eligible to receive the surplus funds as long as they are still being held in the court registry. The attorney for HUD used a case called United States v. Summerlin 310 U.S. 313 (1940) to argue his case. In it, the court found that “when the United States becomes entitled to a claim, acting in its governmental capacity, and asserts its claim in that right, it cannot be deemed to have abdicated its governmental authority so as to become subject to a state statute putting a time limit upon enforcement.” In short, what they are saying is that a government agency is not limited by any state statute of limitations as long as they have preserved their right to do so.

Unfortunately, the judge in our case agreed with HUD. Even though I lost this case, it may be possible to win the next one depending on the circumstances one I handle. Currently it is unclear if a government agency would be subject to this statute if they are 1) defaulted in the initial foreclosure case; or 2) if they were not mentioned in the initial lis pendens or otherwise preserved their right as a subordinate lienholder. I say this because there is a case out there called Ober v. Town of Lauderdale-by-the-Sea, 218 So.3d 952, that states, for a subordinate lienholder to preserve its rights to any surplus funds, it must do so before the “judicial sale” of the property. This in combination with Florida Statute 45.032(1)(b) could potentially keep a government agency from asserting rights. The statute says that a “subordinate lienholder means the holder of a subordinate lien shown on the face of the pleadings as an encumbrance on the property.” If a government agency has a lien but are not mentioned in the pleadings as a lienholder, and they don’t intervene in the foreclosure case prior to the foreclosure sale date, it could mean they won’t be able to get any of the Florida Foreclosure Surplus Funds. I haven’t yet been involved with a case with those specific circumstances…yet. However, because of the research I have done on my most recent dealings with HUD and with other cases, I believe it is possible to win in the future.

If you have been informed by the Clerk of Court that you have Florida Foreclosure Surplus Funds available to you or if you have been contacted by one of those shady third-party surplus recovery companies, please give me a call for a free consultation. I will let you know what potential claims there may be that you must watch out for. I can research whether you have any subordinate lienholders (even government lienholders) that may be able to make a claim to those funds and whether we are able to prevent them from getting those funds. I handle Foreclosure Sale Surplus and Tax Deed Sale Surplus Funds in every County in the State of Florida and I don’t get paid unless you do.

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