Determining Third-Party Claims to Surplus Funds After a Colorado Sheriff’s Sale
After a sheriff’s sale in Colorado, any surplus proceeds remain in the sheriff’s or clerk’s registry until valid claimants step forward. Colorado law outlines a clear process for notifying and prioritizing creditors or lienholders. This guide explains how to identify potential claims and ensure a proper distribution of surplus funds.
1. Understand Colorado’s Statutory Framework
Under C.R.S. § 38-38-103, the sheriff must deposit surplus funds into the court registry and send notice to the former owner and all recorded lienholders. You can review the statute here: C.R.S. § 38-38-103.
2. Conduct a Thorough Title Search
Visit the county clerk and recorder’s office (online or in person) to pull the property’s chain of title. Look for:
- Mortgages and deeds of trust
- Mechanics’ liens
- IRS and state tax liens
- Judgment liens
- Homeowners’ or association liens
Record each instrument’s date and priority. Senior liens have first claim on surplus funds.
3. Send Statutory Notice to Potential Claimants
After identifying lienholders, send each a notice that includes:
- Property description and sale date
- Amount of estimated surplus
- Deadline and instructions for filing a claim
Follow the timing and form requirements set forth in C.R.S. § 38-38-103 to avoid challenges.
4. Evaluate Claim Validity and Priority
When multiple claims arrive, determine which liens were properly perfected and their recording dates. Priority rules dictate payment order:
- Senior liens recorded first
- Junior liens recorded later
- Any unrecorded or defective liens may be disallowed
5. Resolve Disputes Through Court Petition
If claimants dispute the distribution, file a petition in the district court where the sale was held. The court will verify each claim’s validity and priority, then issue an order distributing the surplus accordingly.
6. Collecting Your Share of the Surplus
Once the court signs off on distribution, claimants can pick up their funds from the clerk’s office. Be mindful of any collection deadlines to prevent escheatment to the state.
Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a licensed Colorado attorney to discuss your specific situation.
Helpful Hints
- Use a title examiner for complex lien chains.
- Double-check county and state tax lien records.
- Keep copies of all notices and certified mail receipts.
- Track statutory deadlines on a calendar.
- Engage an attorney if multiple liens have competing priorities.