On August 1, 2018, the Third District Court of Appeal released an opinion in Rahimi v. Global Discoveries, Ltd, that provided an appellate win for McCumber Daniels and its client and clarified the statutes governing distribution of surplus tax deed sales proceeds. The issue on appeal was whether the clerks of courts, who are authorized to distribute surplus tax deed sale proceeds, should distribute those proceeds based on priorities that existed on the date of the tax deed sale, or on some later date, when contested claims are settled by the courts. The court held “that the determination of who is entitled to the surplus is made at the time of the tax deed sale.”
When a tax deed sale results in an amount over what is required to pay the property tax and other government liens on the property, that surplus is to be distributed to the property’s former titleholders, lienholders, and mortgagees, in order of priority. Often, however, after the tax deed sale, a mortgagee will release the mortgage (without filing a satisfaction of the lien) to, among other reasons, assist the new tax deed titleholder in being assured of a clean title. In the case before the district court, the former titleholder claimed that by releasing the mortgage after the tax deed sale, but before the surplus proceeds were distributed, the mortgagee had also released its interest in the proceeds because the mortgage had been eliminated. Throughout Florida, many former titleholders had successfully made the same claim and obtained surplus proceeds that would otherwise have gone to former lienholders with priority.
The trial court, and on appeal, the district court, disagreed with the former titleholder. The appellate court explained that the statutes governing distribution of surplus tax deed sale proceeds indicated, in three distinct sections, that entitlement to the surplus proceeds is determined by the priorities on the property at the time of the tax deed sale, not at some later date when distribution actually occurs. The Third District Court of Appeal’s decision is instrumental in settling what date defines the priority of entitlement to surplus tax deed proceeds when there are competing claims.