Who can claim excess funds from a tax sale?

Sometimes, the sales price at a tax sale exceeds the amount necessary to satisfy the tax lien.  O.C.G.A. 48-4-5(a) explains the process to distribute those excess funds.  Generally, excess funds are distributed to owners or lienholders in order of their priority of interest in the property.

“Under Georgia law, a tax commissioner holds any excess funds generated by a tax sale in a fiduciary capacity, [] and the disbursement of those funds is governed by OCGA § 48–4–5.” Iglesia Del Dios Vivo Columna Y Apoyo De La Verdad La Luz Del Mundo, Inc. v. Downing, 321 Ga. App. 778 (2013).

The right to receive excess proceeds can also be assigned after the tax sale is completed. See Barrett v. Marathon Investment Corp, 268 Ga.App. 196, 197-198 (2004).

“[A] tax commissioner is authorized to use the excess funds to satisfy any outstanding ad valorem taxes owed by the defendant in fi. fa. that accrued on the subject property before the tax sale. [] But the same is not true where the outstanding ad valorem taxes accrued on the subject property after the tax sale, because the tax deed purchaser is liable for those taxes…” Iglesia Del Dios Vivo Columna Y Apoyo De La Verdad La Luz Del Mundo, Inc. v. Downing, 321 Ga. App. 778, 781 (2013).

An issue arose regarding whether one looked at the time of the sale or the time of the distribution to determine who was entitled to claim an interest in excess funds.  A 2015 decision by the Georgia Court of Appeals (currently being reviewed by the Georgia Supreme Court in Case Number S16G0646 as of the date of this article on 2/9/2017) held that those who had an interest at the time of the sale are those entitled to claim excess funds. See DLT List LLC v M7ven Supportive Housing & Development Group, 335 Ga.App. 318 (2015).

That decision observed that “tax-sale purchasers have no claim to the excess funds based on their post-sale ownership” (Id. at 439, 322) and then overruled previous decisions, deciding instead that a redeeming creditor does NOT have a first priority claim on the excess tax funds for the amount paid to redeem the property.

Unless the Georgia Supreme Court reverses, this decision is being followed.

It is also important to note that, if a lien which existed prior to the tax sale is satisfied before excess funds are distributed, then the lien holder no longer has a right to receive excess funds (because it is no longer owed anything).  See Bridges v. Collins-Hooten, 339 Ga.App. 756, 761 (2016) (“Although SPS apparently had an interest in the Property at the time of the tax sale that gave it a statutory right of redemption, it is undisputed that SPS’s security deed has now been fully satisfied, and it no longer retains any priority lien on the Property. [] Accordingly, the trial court erred in finding that SPS is entitled to receipt of the Funds instead of Eric, as the administrator of the original owner’s estate.”).

However, if a mortgage is not satisfied, but mortgage title simply reverts by the passage of time under OCGA 44-14-80 (after the tax sale but before excess funds are distributed), then the Georgia Court of Appeals has held that the mortgage holder still has their right to excess funds that vested at the time of the tax sale. See Worthwhile Investments LLC v Higgins, 337 Ga.App. 183 (2016).

 

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Posted in Excess Funds