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Florida Foreclosure Surplus Funds - The Law is Clear. Third-Party Purchasers are Not Entitled to Any Foreclosure Surplus Funds. Why do they keep trying?

It seems that every week I get calls from people who have purchased a property (third-party purchaser) at a foreclosure sale asking me if I can help them get the Florida Foreclosure Surplus Funds. I also receive motions filed in some of my current cases where one of these third-party purchasers has hired an attorney to request the surplus funds, or they have filed the motion pro se. The law is very clear that a third-party purchaser is not entitled to the Florida Foreclosure Surplus Funds under any circumstances, but why do they keep trying?

I would say that most of these requests by a third-party purchaser is due to greed. The other reason is that they just don’t understand the law. Just this week I have had to file motions to strike requests for surplus funds in two separate cases. One of them the purchaser is represented by an attorney and claims the third-party purchaser is entitled as “owner of record”. The other motion to strike was against a pro se party asking the court for the surplus funds so they could pay off other liens that came with the property when they purchased it. Neither of these are valid arguments.

The first argument (Owner of Record) fails because of Florida Statute 45.032(2). This statute states in relevant part, “the owner of record on the date of the filing of the lis pendens is the person entitled to surplus funds after payment of subordinate lienholders who have timely filed a claim.” A person or entity that purchases the property at a foreclosure sale cannot be the “owner of record” on the date of the filing of the lis pendens. The lis pendens is the beginning of the case and literally means, “lawsuit pending”. In order for this statute to apply to you, you have to be the owner of record when the notice telling you there is a lawsuit pending against you is filed.

Additionally, cases like this have been handled numerous times in the Florida Appellate Courts. Specifically, the case of Pineda v. Wells Fargo Bank, N.A. was decided in the Third District Court of Appeals. The court in this case went through the statute and defined who the owner of record is and finally stated, “[n]either 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. The statute is clear: the owner of record at the time of the recording of the lis pendens is entitled to any surplus proceeds.”

The second argument has a similar outcome. In this second one, the third-party purchaser is asking the court to disburse the Florida Foreclosure Surplus Funds claiming that it is either a subordinate lienholder or takes the place of one in order to pay off subordinate liens still attached to the property after the foreclosure sale. Florida Statute 45.032(1)(b) states that, “Subordinate lienholder” is defined to mean “the holder of a subordinate lien shown on the face of the pleadings as an encumbrance on the property.” If someone purchases a property at a foreclosure sale, they cannot then claim to be a subordinate lienholder since they have not filed a lien against the property. To be a lienholder at all, a lien must be recorded with the Clerk of Court.

This was also discussed in the Fifth District Court of Appeals case, Rodriguez v. Federal Nat. Mortgage Assn., where the court defined a subordinate lienholder based on the statute and finally held “there is no mechanism by which a third party could benefit from the surplus funds.”

All of this seems settled. Still, the question remains as to why third-party purchasers continuously try to get at those Florida Foreclosure Surplus Funds. Is it greed? Many of them are trying to recoup their losses from buying a property they didn’t know had encumbrances on it when they bought it. But a search through public records or for a small fee, a title company would have told them of any liens. They could have decided to not bid on this property at the sale. Some of them see the Florida Foreclosure Surplus Funds and feel like they can get some of their money back. It doesn’t work that way though. Just because you feel like you overpaid on something doesn’t mean you can get some of that money back. Lastly, some of this is due to just being ill informed. Even some attorneys and judges don’t seem to understand the law on this. And the surplus recovery companies out there really don’t. Rest assured though, I understand these laws very clearly and I defend against these third-party purchasers all the time.

If you believe you may have Florida Foreclosure Surplus Funds coming to you, I caution you to please contact a competent Foreclosure Surplus and Tax Deed Surplus Attorney so you can make sure some third-party purchaser doesn’t try to get their hands on your money. If you or a deceased member of your family have lost your property to foreclosure sale and you believe there are Florida Foreclosure Surplus Funds or Tax Deed Surplus Funds available, please give me a call for a free consultation. I handle Foreclosure Surplus Funds and Tax Deed Surplus Funds cases in every County in the State of Florida, and I don’t get paid unless you do.

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