Minnesota: Recovering Surplus Funds After a Tax Sale — FAQ

Detailed answer — what happens to sale proceeds and how to recover surplus

When a county sells property because property taxes were not paid, the sale proceeds first cover the delinquent taxes, penalties, interest, and the county’s administrative costs. If the sale brings in more money than is needed to pay those amounts, the remaining money is called the surplus (or excess proceeds). Minnesota law governs how those surplus funds are handled and who can recover them.

Key points you need to know:

• The county treasurer or county auditor typically holds the surplus after the sale.
• There are legal priorities that determine who is entitled to the surplus (for example, certain tax- and assessment-related claims, lienholders, or the former property owner). Exact priorities and procedures are governed by Minnesota statutes and county procedures; see Minnesota Statutes, chapter 282 for tax-forfeiture and sale procedures: https://www.revisor.mn.gov/statutes/cite/282.
• To recover surplus funds you will normally need to file a claim with the county and provide documentation showing your legal interest (for example, a mortgage, contract, deed, judgment, or probate papers).
• If the county denies a claim or multiple parties claim the same funds, you may need to ask a court to decide who is entitled to the surplus. Court processes for resolving competing claims and distributing sale proceeds are governed by Minnesota law; see the statutes that address foreclosure and distribution procedures, such as chapter 580 (foreclosure principles that can apply to proceeds) and chapter 282: https://www.revisor.mn.gov/statutes/cite/580 and https://www.revisor.mn.gov/statutes/cite/282.

Step-by-step process to recover surplus funds

1. Confirm whether a surplus exists and who holds it. Contact the county treasurer or county auditor where the property is located. Ask for the tax-sale file and whether any surplus remains after payment of taxes, penalties, and sale costs. County websites and staff can often tell you whether funds are being held and the amount.
2. Learn the county’s claim procedure and deadlines. Counties usually publish a procedure for claiming surplus proceeds. Some require a written claim form; some accept a notarized affidavit. Ask what deadline, if any, applies and what identification and documentation they require. Statutes and county rules establish timelines and priorities — contact the county promptly because delay can make a claim harder to win.
3. Gather documentation showing your interest in the funds. Typical documents include:
   • Government ID and contact information;
   • Proof of ownership or past ownership (deed, recorded documents, or chain of title);
   • Evidence of liens or judgments (recorded mortgage, assignment, or judgment certificate);
   • Contract or settlement documents showing agreed distributions;
   • Probate or letters of administration if claiming as an heir or personal representative.
4. File a written claim with the county. Submit the county’s required claim form or a written claim that explains your legal basis to the county treasurer/auditor and attach the documentation. Keep copies and get a dated receipt or proof of filing. The county will review the claim and may request further proof.
5. If the county approves the claim, receive payment. Once the county verifies the claim and any competing claims are resolved, it will usually issue payment to the entitled party or parties. Expect the county to withhold amounts it believes are owed for taxes, fees, or other prioritized claims until resolution.
6. If the county denies the claim or there are competing claims, consider court action. A denied or disputed claim may require a lawsuit or petition in Minnesota district court to determine entitlement to the surplus. Courts will examine priority of liens, the timing of recordings, and the legal relationships of the claimants. If you file a court action, gather the same documentation and be prepared to show legal authority to the funds.

Who generally gets priority?

The county pays the taxes, penalties, interest, and sale costs first. After those amounts are paid, distribution follows statutory priorities and recorded interests. Priority typically favors government tax claims and then secured lienholders according to the order of their recorded liens; former homeowners sometimes receive remaining funds only after higher-priority claims are satisfied. Because priorities depend on recording dates, lien types, and specific statutes, check the relevant statutes and county procedures: Minn. Stat. ch. 282.

Common complications

• Multiple competing claimants (heirs, mortgagees, judgment creditors) can delay distribution.
• Incomplete documentation or incorrect claim forms can lead to denial or delay.
• Time limits or escheat rules may apply if funds remain unclaimed for a long time; counties sometimes have procedures for unclaimed funds — check county rules and statute.

Helpful Hints

• Contact the county treasurer or auditor the same day you learn about a tax sale — acting quickly preserves options and documents important dates.
• Ask the county for a copy of the sale statement and the accounting that shows the calculation of the surplus — this helps identify what amounts were paid first and who might have priority.
• Collect all recorded documents related to the property (deeds, mortgages, assignments, judgments). Dates and recording information matter for priority.
• If you are a former owner seeking surplus, show proof of prior ownership and be prepared to explain whether you had any outstanding mortgages or liens at the time of sale.
• If you are a lienholder (for example, mortgagee or judgment creditor), provide the recorded lien, assignment documents, and proof of the amount due.
• Get everything in writing: ask the county to confirm its process, deadlines, and any decision in writing.
• If the county denies your claim or multiple parties claim the funds, consider consulting an attorney experienced in Minnesota tax-sale and surplus-proceeds litigation — an attorney can help with court petitions to resolve competing claims.
• Review relevant Minnesota statutes while preparing your claim; useful starting points include Minnesota Statutes, chapters 282 and 580: Chapter 282 and Chapter 580.