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Florida: Subordinate Mortgage Lienors’ and Foreclosure Sale Surplus

Posted By USFN, Friday, August 1, 2014
Updated: Tuesday, October 13, 2015

August 1, 2014

 

by Roger Bear
Florida Foreclosure Attorneys, PLLC – USFN Member (Florida)

Florida is a judicial foreclosure state. A first mortgage holder must name as defendants in the complaint all subordinate lienholders including subordinate mortgagees. When a foreclosure judgment is entered on the first mortgage, Florida Statute 45.031(1)(a) requires that the final judgment shall contain the following statement in conspicuous type:

IF THIS PROPERTY IS SOLD AT PUBLIC AUCTION, THERE MAY BE ADDITIONAL MONEY FROM THE SALE AFTER PAYMENT OF PERSONS WHO ARE ENTITLED TO BE PAID FROM THE SALE PROCEEDS PURSUANT TO THIS FINAL JUDGMENT.
IF YOU ARE A SUBORDINATE LIENHOLDER CLAIMING A RIGHT TO FUNDS REMAINING AFTER THE SALE, YOU MUST FILE A CLAIM WITH THE CLERK NO LATER THAN 60 DAYS AFTER THE SALE. IF YOU FAIL TO FILE A CLAIM, YOU WILL NOT BE ENTITLED TO ANY REMAINING FUNDS.

After the foreclosure sale is held, the clerk of the court is required to file a certificate of disbursements, which must contain this statement:

IF YOU ARE A PERSON CLAIMING A RIGHT TO FUNDS REMAINING AFTER THE SALE, YOU MUST FILE A CLAIM WITH THE CLERK NO LATER THAN 60 DAYS AFTER THE SALE. IF YOU FAIL TO FILE A CLAIM, YOU WILL NOT BE ENTITLED TO ANY REMAINING FUNDS. AFTER 60 DAYS, ONLY THE OWNER OF RECORD AS OF THE DATE OF THE LIS PENDENS MAY CLAIM THE SURPLUS.

In the recent Florida appellate decision of Mathews v. Branch Banking & Trust Co., 2014 WL 2536831 (June 6, 2014), the court was called upon to resolve competing claims to surplus funds resulting from a mortgage foreclosure sale held after entry of a foreclosure judgment on a first mortgage. At the foreclosure sale the second mortgagee was the high bidder for over $135,000 in excess of the amount due under the foreclosure judgment. Although it promptly obtained a certificate of title to the property, it waited over 10 months to file a claim to the surplus. In the interim, the mortgagor also filed a claim to the surplus.

The trial court awarded the surplus funds to the second mortgagee, but this was reversed by the appellate court. The appellate court found that the second mortgagee’s assertion of a claim to surplus funds in its answer and affirmative defenses to the first mortgagee’s foreclosure complaint did not satisfy the statutory requirement that a party file a claim with the clerk of court within 60 days after the foreclosure sale of property. Since the second mortgagee failed to file a claim to the surplus within 60 days of the foreclosure sale, it was not entitled to the surplus.

The Mathews case makes it clear that subordinate lienors such as second mortgagees must file a claim to foreclosure sale surplus within 60 days after the foreclosure sale of property. Failure to do so will prevent them from receiving any of the surplus.

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