Can the Federal Government Take Your Foreclosure Surplus Money in Florida?

When a Florida property sells at a tax deed auction for more than the taxes owed, the extra money, called surplus, is held by the clerk of court for the former owner or their heirs. Most families assume the only question is how to file the claim. One recent Florida case shows a harder truth: sometimes the money was never really the family's to claim, and finding that out late costs everyone a year of hope and paperwork.

A big surplus, and a family ready to claim it

In this case, a home sold at a county tax deed sale and left a surplus of more than $300,000. The record owner had passed away without a will and without a probate case, so her spouse and her adult children shared the claim under Florida intestacy rules. That is a common and workable situation. Heirs claim surplus money after a death all the time.

Two different surplus recovery companies found the family. Each company signed some of the heirs and filed claims with the clerk. On paper, it looked like an ordinary contested claim, the kind where the court divides the money according to each heir's share and the companies collect the fees stated in their agreements.

Then the United States filed its own claim, for the entire surplus.

The problem nobody checked

Years before the tax sale, one member of the family had been indicted in federal court. The government had recorded a notice in the county land records tying the property to that criminal case, and a federal court later entered a forfeiture order covering the property itself. In plain terms, the government's position was that the property, and therefore the money it produced at auction, already belonged to the United States before the tax sale ever happened.

There was another warning sign in the deed history. The property had been transferred inside the family for no payment shortly before an arrest. The buyer who purchased the home at the tax deed sale argued that this transfer was made to shield the property, and the court record supported looking at it that way.

The family and the two recovery companies had signed agreements, filed claims, and answered a court case. None of that mattered, because an assignment can only transfer what the signer actually owns. After a hearing, the court awarded the clerk's legal costs, paid a homeowners association claim of about $10,700 that was found to predate the sale, and directed the remainder, roughly $287,000, to the federal government. The heirs received nothing. The recovery companies received nothing.

What this means for your family

First, a recorded federal notice can outrank everyone. Tax liens, court judgments, and criminal forfeiture claims from the federal government do not behave like an ordinary creditor claim. If the government filed its claim against the property before the sale, it may take the surplus ahead of the owner, the heirs, and any company they signed with.

Second, check the whole family's record, not just the owner's name. In this case the record owner had done nothing wrong. The federal claim arrived through a relative who had transferred the property into her name. A careful review searches the land records and court records for every person in the chain of title.

Third, deed transfers inside a family deserve a second look. A gift transfer made while legal trouble is brewing can be challenged later, and that challenge can follow the money long after the property is sold.

Fourth, ask any recovery company what they checked before they ask for your signature. A responsible company should be able to tell you whether any federal lien, lis pendens, or forfeiture notice appears in the records, and what their fee is, in writing, before you sign. In this case, one company's filed paperwork assigned the heir's entire interest without stating any fee percentage at all, and the other company's fee sat in a separate agreement that was never shown to the court. Vague paperwork is a warning sign even when the claim itself is solid.

The bottom line

Surplus money feels like found money, and that feeling can rush families into signing with the first company that calls. Slow down. Ask what claims already exist against the property, ask for the fee in plain writing, and remember that the biggest claim in the room is not always the family standing in front of you. Finding a federal claim early does not save the money, but it saves a year of false hope, and it costs nothing to check before you sign.

This article is for general information only and is not legal advice. Every case is different; consult a licensed Florida attorney about your specific situation.