This website uses cookies to store information on your computer. Some of these cookies are used for visitor analysis, others are essential to making our site function properly and improve the user experience. By using this site, you consent to the placement of these cookies. Click Accept to consent and dismiss this message or Deny to leave this website. Read our Privacy Statement for more.
Home   |   Contact Us   |   Sign In   |   Register
Article Library
Blog Home All Blogs
Search all posts for:   


View all (853) posts »

Changes to Florida Surplus Fund Statute: Claim It or Lose It

Posted By USFN, Monday, June 15, 2020

by Nicholas J. Vanhook, Esq. and Jane E. Bond, Esq.
McCalla Raymer Leibert Pierce, LLC
USFN Member (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

Ever since the United States housing market collapse in 2008, when a lender instituted a foreclosure action and obtained a Final Judgment of Foreclosure, the foreclosure sales process was relatively straight forward in Florida.  The property was listed for sale at a public auction, Certificate of Title was issued to highest bidder, typically the lender for a nominal amount, and the property was placed in that lenders book of Real Estate Owned (REO) until it was eventually marketed and sold to the general public.  The primary reason this process was so straightforward was based on one simple fact: The Final Judgment of Foreclosure was for an amount substantially more than what the property was worth.  Since the lender received a credit bid at the foreclosure sale for the value of its judgment, third-party purchasers were rarely the highest bidders at the public auction.   The logic behind this standard course of events is simple.  Why would a third party pay more for a property than what it was worth?  Simply put, they wouldn’t. 

Fast forward over a decade and the process is becoming less standard.  Once again, the reason is based on one simple fact: Property values have not only stabilized over the past decade but have increased to a level that the Final Judgment of Foreclosure obtained by a lender is often for an amount less than the property’s value.  Therefore, those third-party purchasers, who were nowhere to be found ten years ago, are now competitively bidding at foreclosure sales, and the winning bid is often thousands of dollars more than the Final Judgment of Foreclosure.  These surplus funds are then held by the Clerk of Court, pursuant to 45.032, Fla. Stat. until a court order is entered determining how the funds should be distributed.

Once foreclosure sales resume in Florida after the COVID-19 moratorium, this will continue as a very small percentages of Florida homes are underwater. Residential properties are in demand with few being available on the market. Unless there is a significant decline in property values, third party purchasers will continue to bid at foreclosure sales resulting in surplus funds.

In this current era of surplus funds becoming the norm as opposed to the exception, the question is, who is entitled to these funds and what is the proper procedure to ensure they are obtained?  It is well established under Florida law, that any surplus remaining after a foreclosure sale should be paid to the junior lienholders based on their priority as it relates the foreclosed property.  Only after junior liens have been satisfied, can the prior homeowner receive any surplus funds.  General Bank, F.S.B. v. Westbrooke Pointe, Inc., 548 So. 2d 736 (Fla. 3d D.C.A. 1989). 

So, when does a junior lienholder need to file a claim with the court to ensure it does not waive rights to the surplus funds being held by the Circuit Court Clerk?  Simply, within one year of the foreclosure sale. On July 1, 2019, Fla. Stat. 45.032 was amended eliminating the “surplus trustee” and changing the amount of time to file a claim. The surplus trustee was the person appointed by the County Clerk to seek out the prior homeowner, if no surplus claim was filed by any party within the 60 days.  This surplus trustee had one year from the date it was appointed to locate the prior homeowner before those funds were deemed unclaimed property.  Now, the statute simplifies this process by taking away the surplus trustee and stating, any surplus remaining with the Clerk one year after the foreclosure sale is deemed unclaimed property.  From the plain language of 45.032, Fla. Stat., junior lienholders now have up to one year from the foreclosure sale to make a claim for surplus funds.  This is more time than the 60 days which is beneficial to the inferior lien holders giving them additional time to hire an attorney and file a claim.

Many junior lienholders refer the case to counsel as soon as the senior lienholder files their foreclosure. This is the best practice, to allow for monitoring the case through the senior lienholder foreclosure. Counsel appears, answers the complaint, and obtains all pleadings ensuring the inferior lien is protected and any claims for surplus are made. The most prudent course of action is for junior lienholders to make a surplus claim as soon as possible after the foreclosure sale, as other junior lienholders and/or the borrower may also be filing a claim and setting the surplus distribution for hearing prior to the new one-year claim period. If no claim is made within a year, the claim may be lost when the clerk reports the funds as unclaimed property.

Copyright © 2020 USFN. All rights reserved.


June USFN e-Update


This post has not been tagged.

Share |
Permalink | Comments (0)
Membership Software Powered by YourMembership  ::  Legal