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Third-Party Purchasers at HOA Foreclosure Auctions Beware

In certain instances, however rare, a surplus may exist after a property has been sold at a foreclosure auction. A surplus means that the winning bidder at the foreclosure auction purchased the property for more than the amount listed on the final judgment of foreclosure, such that funds remain even after the foreclosing mortgage lender has been paid in full and the Clerk of the Court’s administrative fees have been paid.

The Florida Statutes govern what happens to the surplus. If a surplus occurs after a foreclosure auction, the surplus funds are held by the Clerk of the Court in the Court Registry until someone files a claim for the surplus. Generally, the only parties that may claim the surplus are subordinate lienholders or the prior owner of the property before the foreclosure auction occurred. The Florida Statutes define a “subordinate lienholder” as a party that includes, but is not necessarily limited to, the holder of a second mortgage, judgment, tax warrant, condominium association or homeowner’s association lien, or construction lien. If a valid subordinate lienholder exists, the subordinate lienholder is entitled to be paid from the surplus before the prior owner of the property receives any surplus funds. If any surplus funds still exist after paying the subordinate lienholder, the prior owner of the property is entitled to the remaining surplus funds.

Pursuant to the Florida Statutes, a subordinate lienholder who wishes to file a claim against the surplus must file a claim no later than 60 days from the date that the Clerk of the Court issues a Certificate of Disbursements, which is a document indicating the total amount of funds that were paid out as a result of the foreclosure auction, to whom the funds were paid out, and the total amount of surplus funds remaining after the initial disbursements. If a subordinate lienholder fails to timely file a claim against the surplus within the 60-day period, the subordinate lienholder will thereafter be precluded from claiming the surplus. After the 60-day period has expired, only the prior owner of the property is entitled to file a claim for the surplus.

If, however, the prior owner of the property files a claim for the surplus during the 60-day period, the Florida Statutes provide that the prior owner’s claim must be signed under penalty of perjury in the presence of a Notary Public, and the prior owner must certify in the claim that the prior owner did, in fact, own the property prior to the foreclosure sale; that the prior owner does not owe any money on any mortgage on the property that was foreclosed, other than the mortgage that was paid off by the foreclosure; that the prior owner does not owe any money that is the subject of an unpaid judgment, tax warrant, condominium association or homeowners association lien, or construction lien; that the prior owner is not currently in bankruptcy; that the prior owner has not sold the right to the surplus; and what the prior owner’s current address is.

If you have purchased a property at a prior HOA foreclosure auction and are now facing foreclosure of a mortgage lien against that property, we welcome the opportunity to meet with you during a free consultation to discuss what options you may have. For more information about foreclosure defense, please visit our website at: Loan Lawyers, LLC has helped over 5,000 South Florida homeowners and consumers with their debt problems. Please do not hesitate to contact us to see how we may be able to help you: