Condo Law – Making Claims for Surplus Resulting from Tax Deed Sales
Mr. Jose H. Garcia, Esq., is an Associate at Cuevas, Garcia & Torres, P.A. Cuevas, Garcia & Torres, P.A., provides legal services in the areas of Community Association Law, Real Estate law, and Business Immigration, including title insurance services through Vantage Property Title Company. If you have any questions regarding this article or any other questions, you may contact Mr. Garcia at (305) 461-9500 or via e-mail at [email protected]. If you are interested in reading previous newsletters, please visit www.cuevaslaw.com, select the icon for Newsletters, and then choose the area of law you are interested in.
Making Claims for Surplus Resulting from Tax Deed Sales
It is well established that tax deed sales extinguish liens recorded by condominium or homeowners associations. Florida Statute §197.552 states:
Except as specifically provided in this chapter, no right, interest, restriction, or other covenant shall survive the issuance of a tax deed, except that a lien of record held by a municipal or county governmental unit, special district, or community development district, when such lien is not satisfied as of the disbursement of proceeds of sale under the provisions of s. 197.582, shall survive the issuance of a tax deed.
The Court in Cricket Props., LLC v. Nassau Pointe at Heritage Isles Homeowners Association, Inc., 124 So. 3d 302 (Fla. 2d DCA 2013) held that Florida Statute §197.552 controlled over Florida Statute §720.3085 and, thus, liens for unpaid assessments do not survive the issuance of a tax deed.
However, even though the association will be unable to collect any unpaid assessments that accrued prior to the issuance of the tax deed from the new owner, if there is a surplus resulting from the tax deed sale the association may be able to collect and recuperate a portion of its unpaid assessments. Florida Statute §197.582(2) provides, in pertinent part, that if the property is purchased for an amount in excess of the statutory bid of the certificate holder, the excess shall be used to pay all government liens of record upon the property in full and if there then still remains a balance of undistributed funds, it shall be retained by the clerk for the benefit of persons described in s. 197.522(1)(a). Additionally, the clerk shall mail notices to such interested persons notifying them of the funds held for their benefit.
Following a tax deed sale where there remains a surplus, the association, if it has recorded its Claim of Lien on the subject property, will receive a notice of surplus from the clerk, which will provide instructions on how to properly make a claim for the surplus. In Miami-Dade County the notice will advise that in order to be considered for distribution of the surplus funds one must submit a notarized statement of claim to the clerk providing the details as to one’s lien and the amounts currently due within ninety (90) days of the date of the notice. It is extremely important that the association prepare and submit its notarized statement of claim so that it may have a chance to receive a portion of the surplus.
At the expiration of the period of time provided by the clerk the association should follow up with the clerk to determine if any other statements of claim have been submitted and whether any of the surplus will be disbursed by the clerk. It is extremely likely that there will be a bank that held the mortgage on the property that has a superior right than that of the association, but it is also possible that he bank failed to submit a timely statement of claim. Occasionally, if there is a first mortgage or if it is difficult to determine the superiority of the liens, the clerk will not disburse the funds to the association without a court order, even in some instances where no other party submitted any statement of claim. In the event that the clerk refuses to disburse the portion of the surplus claimed by the association, the association should file a Complaint for Distribution of Surplus Proceeds and name the county’s clerk of courts holding the surplus as well as all potentially interested parties, including the former owner(s), the bank that held the first mortgage, any second mortgagees, and any other party who had a lien on the property. Many times the notice provided by the clerk will include an abstract of the property identifying all the potentially interested parties which can be used to determine which parties may be considered potentially interested parties.
Tax deed sales can result in large write-offs for associations if they are related to properties with high delinquent balances, but they could also result in the receipt of that high delinquent balance, or a portion thereof, if the associations follow the proper procedures and take the necessary actions whenever there is a surplus remaining after the sales.
This article is solely a partial explanation of all the issues related to the topic of this newsletter, and is not to be considered legal advice. The association should consult with its legal counsel to obtain explanations of all issues addressed herein and determine what collection procedures will most benefit your association.