Condominium Associations Can Make Claims (and a Possible Windfall) for Surplus Based on Tax Deed Sales

A Tax Deed Sale is a process by which a county sells property in which there are/were unpaid property taxes due to the county (any county in Florida). There is a specific process by which Florida counties assess and collect property taxes. There are numerous individuals, investors and companies which research various tax records and opt to purchase tax certificates and make payment of the underlying taxes to the local county tax collector for which they receive a tax certificate. Following long established practices, these tax certificate holders can eventually force a sale of the subject real property seeking to either be repaid the underlying taxes plus accrued interest or possibly even take title to the subject real property.

A logical question to ask is how does this benefit Condominium Associations in Florida? Florida condominium Associations are able to make claims for any surplus held by a county related to tax deed sales based on existing laws.

Florida Statute 197.582(2) “Disbursement of proceeds of sale” states, in pertinent part that: “If the property is purchased for an amount in excess of the statutory bid of the certificate holder, the excess must be paid over and disbursed by the clerk. If the property purchased is homestead property and the statutory bid includes an amount equal to at least one-half of the assessed value of the homestead, that amount must be treated as excess and distributed in the same manner. The clerk shall distribute the excess to the governmental units for the payment of any lien of record held by a governmental unit against the property, including any tax certificates not incorporated in the tax deed application and omitted taxes, if any. If the excess is not sufficient to pay all of such liens in full, the excess shall be paid to each governmental unit pro rata. If, after all liens of governmental units are paid in full, there remains a balance of undistributed funds, the balance shall be retained by the clerk for the benefit of persons described in s. 197.522(1)(a)..[emphasis added]

Florida Statute 197.552- Tax Deeds states, in pertinent part that “…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…” This is an important statute. It basically states that liens other than certain municipal, governmental or certain other liens do not “survive” the tax sale..

A 2013 Florida case known as Cricket Props LLC vs. Nassau Pointe at Heritage Isles HOA (Fla. 2d DCA 2013; 124 So 3d 302) stated that Florida Statute 197.552 controlled over Florida Statute 720.2085 and therefore HOA liens generally do not survive the tax sale. It is generally accepted that most current case law holds that any liens for past due assessments do not survive property tax sales and that the associations are not able to hold purchasers at tax deed sales responsible for any past due balance or outstanding assessments which were due as of the date of the tax deed sale. A to Z Props v. Fairway Palms I Condominium Association, Inc. 137 So 3d 453 (Fla. 4th DCA 2014) provides that an owner of a property acquired at by tax deed is not liable to an association for any assessment or balance due which was due prior to the tax deed issuance.

After a tax deed sale is held, if there is an existing surplus (meaning more was paid than was owed to the certificate holder) and the Association has a recorded lien on the real property which was the subject of the tax deed sale, the clerk will issue a notice of surplus to the condo association. Each county in Florida has a process by which a lien holder must follow in order to make a claim for all or a portion of the existing surplus. It is of the utmost importance that an association act expeditiously to be considered for an award of all or a portion of the surplus. Generally speaking, any interested party who had a lien on the subject property can make a claim and it is up to the clerk or county attorney to make the determination as to who is entitled to receive any of the surplus funds as well as the priority in which the claims are to be paid.

Since most real property is generally encumbered by a mortgage, not only will the condo association make a claim fo the surplus but the mortgage holder will as well. In most instances, the amount of the surplus funds will nit be sufficient to pay the mortgage holder and the condo association will receive nothing. However, there are numerous instances for reasons unknown, that the mortgage holder (or its loan servicer, attorney or other responsible party) will fail to make a claim for the surplus within the prescribed time period. Should this occur and the Association has timely filed a claim to the surplus, the Association may be found to have a claim higher in priority than others who may also file a claim and the Association could potentially receive an award of all or part of its claim The amount awarded depends on several factors including the amount of the surplus and the priority assigned to the Association’s claim.

Condominium Associations are cautioned to seek competent legal counsel to assist or handle the claims process. It is not required that an attorney prepare and file the claim but an association attorney is well adept at assisting its clients in seeking an award of tax deed sale surplus funds.

Bakalar & Associates, PA assists its clients on a regular basis in issues such as tax deed sale surplus claims and related matter and can be reached at 954-475-4244 or by email to Attorney Susan P. Bakalar is the managing attorney for Bakalar & Associates, PA and has her Master (“LL.M.”) of Laws in Real Property, Land Development and Finance Law.