This article explains how surplus money from a property tax sale is handled in Delaware and what a former owner or creditor must do to recover those funds. It summarizes typical steps, who has priority for payment, where to file a claim, and practical tips to improve your chance of recovery. This is educational only and not legal advice.
Detailed Answer
What are surplus funds?
When a county sells a property at a tax sale, the sale proceeds first pay outstanding property taxes, penalties, interest, sale costs, and amounts owed to any prior lienholders with priority. Any money left over after those payments is called the surplus (sometimes called excess proceeds). That surplus belongs to the property owner and, depending on priority, certain lienholders.
How surplus is handled under Delaware law (where to check)
Delaware law delegates tax sale procedure and distribution priorities to state statutes and county tax-sale rules. For the specific statutory framework and deadlines, review Delaware statutes governing tax sales (see Title 9 of the Delaware Code) and the county tax-collector or Recorder of Deeds rules where the property lies. You can start with the state code landing page: Delaware Code – Title 9. If surplus funds remain unclaimed, those funds can also become part of the state’s unclaimed property process; see the Delaware State Treasurer’s unclaimed property page: Delaware Unclaimed Property.
Typical step-by-step process to recover surplus funds
- Confirm there is a surplus. Obtain the sale record and closing statement from the county tax office or the buyer’s closing documents showing total sale proceeds and the amounts paid for taxes, fees, and liens.
- Identify who has a claim. The former record owner has the primary right to the surplus. Any junior lienholders or other claimants may also have a right in the order of priority established by statute or recorded lien dates.
- Contact the county tax office or Recorder of Deeds. Counties maintain records of tax sales and disbursements. Ask the county which office holds the surplus, what documentation is required, and whether a formal claim form exists. (Delaware’s three counties—New Castle, Kent, and Sussex—each operate their own tax sale process.)
- Assemble required documents. Counties commonly require proof that you are entitled to the funds. Typical items include a government ID, deed or title showing ownership at the time of sale (or transfer documents), tax bills, a certified copy of the sale record or closing statement, mortgage or lien documentation (if you are a lienholder), and a completed claim form or notarized affidavit.
- File a written claim. Submit the claim and supporting documents to the county office that handles tax surplus disbursements. Keep certified copies and proof of delivery. If multiple claimants appear, the county may hold the funds pending resolution of competing claims.
- If the county cannot resolve competing claims, the county or a claimant may ask a court to decide. When two or more parties claim the same surplus, a Delaware court may hold an interpleader or other equitable proceeding to determine priority and distribution. In contested situations, consult an attorney experienced in Delaware tax sale or property litigation.
- If no one claims the surplus, it may become unclaimed property. After a statutory holding period or after the county follows the procedures under state law, unclaimed surplus funds can be transferred to the State Treasurer’s unclaimed property office. Owners can search the state’s unclaimed property database to check for abandoned surplus funds.
Priority and common pitfalls
Priority for surplus funds normally follows the order of recorded liens and tax liens: taxes and sale costs first, then lienholders in priority order, then the former owner. Do not assume automatic payment — counties often require claimants to file paperwork. Also, strict timelines and technical requirements may apply. Failing to file a timely, properly supported claim can forfeit recovery rights or cause the funds to be transferred to the unclaimed property office.
When to involve an attorney
Consider legal help if the surplus is substantial, if multiple parties claim the same funds, or if the county refuses to release funds despite clear documentation. An attorney can file court actions (for example, an interpleader or declaratory judgment) and help gather or authenticate title and lien documents.
Helpful Hints
- Act quickly. Begin inquiries with the county tax office as soon as you learn of a tax sale; deadlines and administrative requirements can be short.
- Contact the county where the property is located. Each county runs its own tax-sale process and will provide the specific forms and instructions you must follow.
- Keep original documents and get certified copies where possible. Counties usually want certified deeds, sale records, and notarized affidavits.
- Document chain of title. If you are a successor owner or an estate representative, provide documents showing how title passed to you.
- Search the state unclaimed property database. If you believe a county transferred surplus to the State Treasurer, search at the Delaware unclaimed property site: Delaware Unclaimed Property.
- Save all communication. Keep copies of emails, certified mail receipts, and notes of phone conversations with county officials.
- When in doubt, consult counsel. A lawyer can confirm priority, prepare a claim, or file a court action if necessary.
Disclaimer: This information is educational only and not legal advice. It summarizes general Delaware procedures and common practices. For advice tailored to your situation, consult a licensed Delaware attorney or the county office that handled the tax sale.