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Florida Foreclosure Sale Surplus Funds – What are Subordinate Lienholders?

I speak to potential clients on a daily basis about their Florida Foreclosure Sale Surplus Funds. The biggest question they ask is what factors will increase the amount they are due and what factors will decrease the amount they are due. Probably one of the biggest factors to look at is who are Subordinate Lienholders.

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 timely filed a claim.” The question remains, what is a “subordinate lienholder”? According to Florida Statute § 45.032(1)(b), “Subordinate lienholder means the holder of a subordinate lien shown on the face of the pleadings as an encumbrance on the property.” The word “subordinate” means “lower in rank or position”. These are any lienholders holding liens that are lower in position to that of the plaintiff in the subject foreclosure case.

Generally, a mortgage lien is going to be superior (higher in rank) to that of a Homeowner’s or Condo Owner’s Association lien because it is the money used to purchase the property. However, a second mortgage could be subordinate to that of an association lien, depending on when the lien was recorded. Florida Statute § 713.07(1) states “liens shall attach at the time of recordation of the claim of lien and shall take priority as of that time.” This means that Florida is a “first in time” state when it comes to lien priority. When someone purchases a property with a mortgage, that mortgage lien takes effect at the time of purchase or when the mortgage is recorded with the county. Any other liens (apart from certain governmental liens) become subordinate to that mortgage lien because they would have been recorded after the mortgage lien. An exception to this could be with a second mortgage or home equity line of credit mortgage. Those are usually recorded after a purchase money mortgage.

Any lienholder has a right to sue for foreclosure if the subject of the lien is not being paid by the homeowner. If you are being sued for foreclosure by a homeowner’s or condo owner’s association, you should assume that their lien is automatically lower in priority to that of the mortgage lien. That is why the mortgage holder (bank) will rarely be named as a defendant lienholder in a foreclosure case filed by a homeowner’s or condo owner’s association. However, if there is currently a lien on the property by the association and the bank files its foreclosure case first, the association will generally be named as a subordinate lienholder. Sometimes in these cases, there can be a question as to the priority of the lienholders. If that issue comes up, it may be necessary for an evidentiary hearing to determine lienholder priority. But why does this make any difference in the Florida Foreclosure Sale Surplus Funds you may have coming to you?

Because the Florida Statute dealing with surplus funds specifically states that you, the owner, is entitled to the surplus funds, only after subordinate lienholders who timely file a claim, it is extremely important to make sure that only subordinate lienholders are paid and not superior lienholders. There may be other potential lienholders who try to make a claim for the Florida Foreclosure Surplus Funds that aren’t eligible. Sometimes, it is because they are not a part of the original foreclosure case and didn’t intervene into it prior to the sale. Sometimes they are not actually lienholders at all but are the new purchasers trying to use the surplus funds to pay down the liens. (This is absolutely not allowed by Florida law.) And sometimes there are superior lienholders trying to make a claim. Because of these possibilities, it is always best to hire an attorney to help with your case.

Hiring a Florida Foreclosure Sale Surplus Funds attorney who knows and understands the laws surrounding surplus funds is always your best bet to make sure you get the most of the funds you have coming to you. You won’t get the same reassurances from one of those shady surplus recovery companies. If you hire one of them, you will be assigning your rights to the surplus funds to them. If you hire me, I will represent you in court as your attorney and fight for your rights to those Florida Foreclosure Sale Surplus Funds.

If you or a deceased loved one has lost your property to foreclosure sale and you believe there are Florida Foreclosure Sale Surplus Funds available from that sale, please give me a call for a free consultation. I will be happy to discuss your case with you and let you know how much (if any) of those surplus funds you are eligible to receive. I will help you to maximize what funds you are due by making sure anyone else trying to make a claim is actually a proper subordinate lienholder. I handle Foreclosure sale 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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