THE ARTICLE BELOW IS FOR INFORMATIONAL PURPOSES ONLY

AND NOT INTENDED TO BE USED OR RELIED UPON AS LEGAL

ADVICE. THIS INFORMATION IS A SUMMARY ADDRESSING
SEVERAL FREQUENTLY ASKED QUESTIONS REGARDING TAX
DEED SALES IN THE STATE OF FLORIDA. THESE QUESTIONS ARE
ADDRESSED IN A GENERAL MANNER AND NOT INTENDED TO
APPLY TO ANY SPECIFIC CASE, AS CIRCUMSTANCES MAY, AND
USUALLY DO, DIFFER SUBSTANTIALLY FROM CASE TO CASE.

RECALDE LAW FIRM, P.A., IS A MIAMI, FLORIDA BASED LAW

FIRM ASSISTING CLIENTS THROUGH THE PROCESS OF
PURCHASING PROPERTIES AT FORECLOSURE AUCTIONS AND
TAX DEED SALES. INVESTING IN FORECLOSURE PROPERTIES
AND TAX DEEDS INVOLVES NUMEROUS RISKS, INCLUDING
POTENTIALLY COSTLY CONSEQUENCES OF PURCHASING
PROPERTIES WITH HIDDEN LIENS.

CONTACT RECALDE LAW FIRM, P.A. AT 305-792-9100 TODAY

FOR LEGAL GUIDANCE WITH YOUR TAX DEED OR
FORECLOSURE PURCHASES.

Frequently Asked Questions with Regards to Legal Implications of Tax

Deed Auctions in the State of Florida
1-What is a tax deed auction?
Beginning on or before June 1, the Tax Collector is required by law to
hold a Tax Certificate Sale. The tax certificate represents a lien on unpaid
real estate properties. Interest accrues on the tax certificate from June 1 until
the taxes are paid. The amount of the certificate is the sum of the unpaid real
estate tax and the non-ad valorem assessments, penalties, advertising costs
and fees.
Any time after two (2) years have elapsed since April 1 of the year of
issuance of the tax certificate and before the expiration of seven (7) years
from the date of issuance, the tax certificate holder is entitled to submit a tax
deed application.
Pursuant to Florida law, the owner of the Tax Certificate may not seek
to collect the tax until two years have expired from the purchase of the Tax
Certificate. Following this time period, the owner of the Tax Certificate may
apply for a tax deed sale, where the tax deed will be sold to the highest
bidder at a public auction. Unlike the tax certificate, which is an interest
bearing investment that impacts the property as a lien, the tax deed gives an
ownership and possessory interest in the property to the holder upon the
conclusion of the purchase.
2-What effect does a tax deed auction have on the owner of record
immediately preceding the auction’s interest in the Subject Property
following a tax lien auction?
Generally, a tax lien auction will wipe out the owner of record of a
property’s interest in the Subject Property, unless the owner of record is the
highest bidder and redeems the property. If the notice that was given to the
owner record was improper, or if any other act or omission exists in the tax
deed auction, the “wiping out” of the interest may be challenged by the
owner record prior to the auction in an action to Quiet Title.

3--What effect does a tax deed auction have on the primary mortgage
lienholder’s interest in the Subject Property following a tax lien
auction?
In the event the lender does not redeem by paying the delinquent taxes
on the property, a tax lien auction will wipe out the mortgage lien pursuant
to Florida law, in the absence of any act or omission which may give the
mortgagee cause to successfully pursue a Quiet Title action. A lender whose
interests are wiped out will likely, pursuant to Florida law, claim an interest
in excess funds following the tax deed auction to the extent there is an
excess remaining following distribution to governmental and other priority
liens.

4--What effect will the tax deed auction have on judgment liens
encumbering the Subject Property?
Generally, a tax lien auction will wipe out previous judgment liens on the
Subject Property pursuant to Florida law, in the absence of any act or
omission (such as inadequate notice) which may give the judgment holder
cause to successfully pursue a Quiet Title action. However, a judgment lien
holder may, pursuant to Florida law, claim an interest in excess funds
following the tax deed auction to the extent there is an excess remaining
following distribution to governmental and other priority liens.

5--What effect will the tax deed auction have on governmental liens that
may be encumbering the Subject Property?
Liens of record held by municipal or county governmental unit, special
district, or community development district, survive the issuance of a tax
deed, when such liens are not satisfied as of the disbursement of proceeds of
the sale. See Section 197.552, Florida Statutes.
According to Florida statutes, no other liens survive the issuance of the
tax deed. Federal tax liens are not listed in the statute as liens that survive
the tax deed auction. Moreover, the Internal Revenue Code provides an
exception to the priority status of Federal tax liens imposed upon real estate
pursuant to Section 6321, I.R.C. Namely, Section 6323(b) provides that
“Even though notice of a lien imposed by section 63214 has been filed, such
lien shall not be valid...[w]ith respect to real property, as against a holder of
a lien upon such property, if such lien is entitled under local law to priority
over security interests in such property which are prior in time, and such lien
secures payment of...a tax of general application levied by any taxing
authority based upon the value of such property.”
It is often the case that Federal tax liens in place affecting real property
are in place pursuant to Section 6321, I.R.C., which stipulates that “[i]f any
person liable to pay any tax neglects or refuses to pay the same after
demand, the amount (including any interest, additional amount, addition to
tax, or assessable penalty, together with any costs that may accrue in
addition thereto) shall be a lien in favor of the United States upon all
property and rights to property, whether real or personal, belonging to such
person.”
In Donald J. Miravalle and Lillian Joy Miravalle v. Commissioner
Docket Nos. 9870-91, 7251-93, 10686-94., 105 TC --, No. 5, 105 TC 65,
Filed July 31, 1995, the Court noted, with reference to a tax deed auction of
a property that was encumbered by a Federal government seizure, that “...
[b]ecause the Federal Government was given proper notice, the local tax sale
caused the elimination of all junior liens, including that of the Federal
Government.” (Citing Southern Bank of Lauderdale County v. Internal
Revenue Service [85-2 USTC ¶9670 ], 770 F.2d 1001, 1005-1008 (11th Cir.
1985), cert. denied sub nom. Mid-State Homes, Inc. v. United States, 476
U.S. 1169 (1986)).
However, 28 U.S.C. 2410(c) provides that where a sale of real estate is
made to satisfy a lien prior to that of the United States, the United States
shall have not less than 120 days from the date of sale within which to
redeem. The United States often uses this to redeem properties sold in
foreclosure where the United States was not made a party or notified. This
gives the Internal Revenue Service time to investigate and determine
whether it would be to the advantage of the United States to redeem the
property so that it might be resold for more than the cost of redemption with
the resulting benefit to the Government.
Because Florida law is not clear as to whether this 120 day period
applies to tax deed auctions, as it does to foreclosure purchases, this could
be a potential source of unsettled litigation in the event the Federal
government makes such a claim within 120 days from the tax deed auction.
In the event the tax lien becomes unenforceable (by virtue of the expiration
of the 120 day period following the judicial sale), the Tax Lien will be
subject to being released. Section 6325(a) provides for a full release of the
entire tax liability and extinguishment of the lien. The District Director will
issue a Certificate of Release of Tax Lien on Form 669 whenever it is found
that liability for the amount assessed, together with interest, has been
satisfied or has become unenforceable.
In the event there is a surplus between the tax deed auction price and
the tax certificate’s face value plus interest (which represents the
property tax debt on the subject property, plus interest), where does the
law require that the surplus be applied?
By way of summarizing, surplus funds are distributed to lienholders, in
accordance with their lien priority, following a procedure which gives such
persons 90 day notice to make a claim. Unclaimed surplus go to the
County’s Board of Commissioners. The process for distribution of excess
proceeds of tax deed sale are set forth in Administrative Rule 12D-13.065
and in Section 197.502(4), Florida Statutes.

The tax deed applicant sets forth its minimum bid. Any amount in excess of
that bid is distributed as follows:
1-reimbursement of costs to the applicant.
2.-governmental liens (pro rata if insufficient to cover all governmental
liens). Unsatisfied governmental liens survive the issuance of the tax deed
(so they follow the property).
3.- senior mortgage or subsequent liens in order of priority.
4 – titleholder of record.
An example of this distribution, including a claim by the Federal
government, can be observed in the Federal case of KATHRYN HENLEY,
CLERK OF CIRCUIT COURT FOR THE COUNTY OF OKALOOSA, v.
DESTIN GUARDIAN CORPORATION, ET AL.
(http://www.websupp.org/data/NDFL/3:04-cv-00327-47-NDFL.pdf)
Case No. 3:04CV327/RV/MD
The clerk is required to send notices to those persons listed in Section
197.502(4), F.S., (including the titleholder of record) advising them of the
funds held for their benefit. The form of the notice shall be as follows:
********
NOTICE
CTF NO. ______ Description _____
Pursuant to Chapter 197, F.S., the above property was sold at public sale on
____. After payment of all funds due to government units has been made, a
surplus of $____ will remain and be held by this office for a period of ninety
(90) days from the date of this notice for the benefit of persons having
interest in and to this property as described in Section 197.502(4), F.S., as
their interests may appear.
Attached hereto is a copy of the abstract of this property received from the
office of the tax collector reflecting all such persons as described in Section
197.502(4), F.S., having an interest in the subject property. These funds will
be used to satisfy in full, to the extent possible, each senior mortgage or lien
in the property before distribution of any funds to any junior mortgage or
lien. In order to be considered for distribution of these funds, you must
submit a notarized statement of claim to this office, detailing the particulars
of your lien, and the amounts currently due, within 90 days of the date of
this notice. A copy of this notice must be attached to your statement of
claim. After examination of the statements of claim filed, this office will
notify you if you are entitled to any payment. Dated this ___ day of ___,
19__.
***** *
If no statements of claim are filed within 90 days from the date of this
notice, the clerk shall remit the funds, to the board of county commissioners
as provided in Section 197.473, F.S. If there are statements of claim filed, it
is the clerk's duty to insure that the excess funds are paid according to
priorities. If a particular lien appears to be entitled to priority, and that
lienholder has not come forward and made a claim to the excess funds,
payment cannot be made to other junior lienholders. In such a situation,
there are conflicting claims to the funds and the clerk should initiate an
interpleader action against the various lienholders and let the court
determine the proper distribution. As with any interpleader action, the clerk
can move the court for an award of reasonable fees and costs out of the
interpleaded funds.

7- Is there a limitation as to whether the owner of record prior to the tax

deed auctionmay place a bid and purchase the tax deed?
A PURCHASE BY THE OWNER OF RECORD OF A PROPERTY,
DIRECTLY OR INDIRECTLY, WILL HAVE NO LEGAL EFFECT ON
REMAINING LIENS, BUT WILL RATHER BE INTERPRETED AS A
MERE PAYMENT OF BACK TAXES AND MAY BE CONSIDERED A
FRAUDULENT TRANSACTION.
In the 1939 Florida Supreme Court case of BRYAN v. KNOX, 138 Fla.
452, 189 So. 700, Fla. 1939., in which the Court found that “...the procuring
of the tax deed by Cleo Bryan was for the use and benefit of her father L. M.
Bryan and that such procuring of such tax deed amounted to no more than
the payment of taxes,” the Court held as follows:
It is true, as a general rule, that a conveyance by tax deed creates a new
and independent title but there are exceptions to the general rule and one of
those exceptions is that where the tax deed is a mere subterfuge resorted to
by the owner, whose duty it is to pay the taxes, as a means to divest himself
of the prior title to the injury of a mortgagee under a mortgage which he has
executed, the tax deed is void and passes no title, but the transaction only
constitutes the payment of the taxes due. E. H. L. Page Properties, Inc., et al.
v. Pinellas Groves, Inc., 126 Fla. 334, 170 So. 881, and cases there cited.
See, also, Hughes et al. v. Shaner et al., 128 Fla. 183, 174 So. 400.
The Court also made reference to a similar case, noting:
The case is on all-fours with that of Buffum v. Lytle, 66 Fla. 355, 63 So.
717, in which we held: ‘A son living with his old father upon and in charge
of property, mortgaged by the latter, will not be permitted, by securing a tax
deed thereto, to defeat the lien of the mortgagee, in the presence of facts
indicating fraud or collusion, as against a nonresident mortgagee in
ignorance of the nonpayment of the taxes.’
Recent legal opinions on the subject, set forth in American Jurisprudence,
Second Edition, and Corpus Juris Secundum, are attached at the end of this
Opinion for further reading on this subject.