Recovering Surplus Funds After a Massachusetts Tax Sale: A Step-by-Step FAQ

Short answer: If a Massachusetts property sells for more than the unpaid taxes, interest, and sale costs, the former owner or other recorded interest-holders can usually claim the surplus. You must act promptly: contact the municipal tax collector/treasurer, submit a written claim with proof of your interest, and, if the town refuses or multiple claimants arise, pursue a court action to recover the funds.

Detailed answer

What are “surplus funds”?

Surplus funds (sometimes called excess proceeds) are the money left after a tax sale purchaser pays the amount due for unpaid property taxes, interest, penalties, and the costs of the sale. The surplus belongs to whoever has a lawful claim against the property — typically the former owner and then any recorded lienholders in the order the law recognizes.

Where does Massachusetts law say this?

Massachusetts tax sales and related procedures are governed by Chapter 60 of the Massachusetts General Laws. For an overview of the statutory framework, see the Chapter 60 page on the Massachusetts legislature website: M.G.L. c. 60. Municipal procedures and specific steps often flow from the statutes and local practices under that chapter.

Who can claim the surplus?

• The former owner of the property (or the owner of record at the time of the sale).
• Persons or entities with recorded interests in the property at the time of the sale (for example, mortgagees or lienholders). Priority among claimants can depend on the nature and timing of each recorded interest.
• Other parties who can demonstrate a legal right to the funds (for example, heirs, trustees, or an estate representative who can show authority).

Typical step-by-step process to recover surplus funds in Massachusetts

1. Confirm whether a surplus exists. Start with the municipal tax collector/treasurer’s office. Ask for the sale record, the purchaser’s statement of purchase, and a calculation showing the sale price, tax balance, interest, fees, and any surplus.
2. Gather proof of your claim. For an owner: government-issued ID and a deed or other evidence of ownership. For lenders or lienholders: the recorded mortgage, assignment documents, or lien instrument and proof of recording. For estate representatives: letters testamentary or letters of administration and the decedent’s deed/records.
3. File a written claim with the municipality. Deliver a signed, written claim to the collector/treasurer. Include your contact information, a clear statement of your legal interest, and copies of supporting documents. Ask the office for its required form or procedure and for a written receipt.
4. Follow the municipal procedure. Many towns will require the collector to review the claim, verify documentation, and then issue payment to an eligible claimant. Some towns publish a policy or form for surplus claims; if so, use it.
5. Resolve competing claims. If multiple parties claim the same surplus, the municipality may hold the funds until a court determines entitlement. If the town refuses to release funds or there is a dispute about priority, you typically must ask a court to decide.
6. Pursue a court action if necessary. If the municipality denies your claim or competing claimants dispute entitlement, you can file a civil action in an appropriate Massachusetts court (often Land Court or Superior Court) asking the court to order payment and resolve priorities. An attorney can advise which court and the exact petition or complaint to file.

Timing and deadlines

Timing matters. Municipalities may have internal deadlines or administrative procedures. If you anticipate a dispute, start the process as soon as you learn of the sale. If the municipality deposits surplus funds with a treasurer or court, state statutory deadlines and statutes of limitation may affect your claim — consult the town and an attorney promptly.

What if the municipality won’t cooperate?

If the collector/treasurer declines to release a valid surplus or claims another party has priority, you generally can seek relief in court. The court can direct the municipality to pay the funds to the rightful claimant. Because court filings and proof requirements can be technical, many claimants hire an attorney experienced in Massachusetts tax-title and property law to file the action and handle hearings.

Costs, fees, and tax consequences

Municipalities may deduct allowable sale costs before calculating the surplus. If you need to bring a lawsuit, court costs and attorney fees may apply. Also consider potential tax consequences of receiving surplus proceeds; consult a tax advisor about reporting requirements.

Practical examples (hypothetical)

Example 1: A property owner sold at tax auction. Sale proceeds were $100,000; taxes, interest, and costs totaled $85,000. The municipal treasurer shows a $15,000 surplus. The former owner presents a deed and ID, files a written claim, and the municipality pays the surplus to the former owner after verifying identity.

Example 2: A mortgage lender recorded a mortgage before the tax liens and later the property sold for an amount producing a surplus. The mortgagee files a claim and supplies the recorded mortgage. If the former owner and the mortgagee both claim the surplus, the municipality may require a court determination to resolve priority.

Helpful Hints

• Contact the municipal tax collector or treasurer immediately when you learn of a tax sale. They hold the initial records and guide claim procedures.
• Request and keep written receipts of any submissions to the town (claims, copies of documents, emails). Document dates, names, and responses.
• Gather strong documentary proof of your interest: deed, recorded mortgage, assignments, probate letters, or court orders showing authority to act.
• If multiple parties claim the same surplus, expect the town to hold funds until a court decides. Engage counsel early to avoid delays.
• Use the Massachusetts General Laws Chapter 60 as a starting reference for tax-sale rules: M.G.L. c. 60.
• Ask the treasurer whether the town has a formal surplus-claim form or local bylaw—procedures vary by municipality.
• Consider hiring an attorney experienced in Massachusetts tax-title and property law if the surplus is large, the ownership is disputed, or the municipality resists paying out.

Disclaimer: This article explains general Massachusetts procedures for recovering surplus funds after a tax sale. It is educational only and not legal advice. For advice about your specific situation, contact a licensed Massachusetts attorney or the municipal treasurer/collector.