After the Sale: Can the Tax Commissioner Use Excess Funds for Unpaid Taxes?

Real Estate Law

In recent years, Georgia has seen it’s fair share of tax sale foreclosures. Not surprisingly, these types of foreclosures raise a number of important issues. One issue frequent one concerns the surplus or excess funds generated by the tax sale.

The big question we often see is, who gets the excess funds?

In today’s post we will look at whether the Tax Commissioner can use excess funds generated by the tax sale to pay the taxes the homeowner owed the government in the first place.

Tax Sales and Excess Funds.

Before we answer that question, however, you first have to understand what excess funds (sometimes referred to herein as “surplus funds”) are and how they are generated.

Briefly, when a homeowner fails to pay his property taxes, a tax lien will automatically be filed against the property. If the property owner cannot pay what is owed after the lien is filed, then the property will be sold (in short order) at tax sale for the amount of the back taxes plus any fines or fees owed to the government.

If, as often happens, the house sells for more than the amount of back taxes, fines and fees, this overage of funds is generally referred to as “excess funds” or “surplus funds.”

Who Gets the Excess Funds?

The question of who gets any excess funds generated by a tax sale is answered by Georgia law which provides that any excess funds existing “after paying taxes, costs, and all expenses of a sale made by the tax commissioner” shall be distributed “to the owner or owners as their interests appear in the order of priority in which their interests exist.”

This means that the excess funds may be claimed by:

  • the record owner of the property at the time of the tax sale,
  • the record owner of each security deed affecting the property, or
  • by any other party having any recorded equity interest or claim in the property at the time of the tax sale.

 The Tax Commissioner and Excess Funds.

So, now to our question. Can the Tax Commissioner keep the excess funds to pay off the back taxes?

The brief answer is “no.” While the Tax Commissioner is authorized to apply excess funds to satisfy outstanding property taxes owed by the delinquent taxpayer that accrued before the tax sale, they cannot be used to pay outstanding taxes after the sale.

Why?

Because the courts have reasoned that after the sale it is the tax deed purchaser —not the delinquent taxpayer—who is liable for any post-tax sale property taxes.

We Can Help You With All Your Real Estate Needs.

At the Law Offices of Mark Weinstein, P.C., we understand real estate. Our practice is concentrated on real estate and related litigation issues.  We serve clients in Atlanta, and in a number of counties throughout Georgia, including: Clayton County, Cobb County, Dekalb County, Douglas County, Fulton County, and Paulding County, among others.  To find out how we can help you, call us at: 770-888-7707. Or contact us here.

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