How to Claim Excess Proceeds and Surplus Funds in Texas

Texas handles leftover sale money in two different ways. When property is sold after a tax suit for unpaid property taxes, the leftover is called excess proceeds, and Tax Code sections 34.03 and 34.04 spell out how to claim it. When a lender forecloses under a deed of trust, a trustee conducts the sale, and we could not confirm a statute that sets a claim form or deadline for that surplus. This guide covers both, with more detail on the tax side because the law there is specific.

Tax sale excess proceeds

The clerk’s notice

If the excess is more than $25, the clerk of the court must send the former owner a written notice at the last known address before the 31st day after the clerk receives the money. The notice states the amount, explains the right to claim it, and includes the text of sections 34.03 and 34.04 Tax Code §34.03(a)(1). The clerk keeps the money for two years after the date of the sale unless the court orders otherwise §34.03(a)(2).

Deadline and how to file

A claimant files a petition in the court that ordered the seizure or sale, and the petition must be filed before the second anniversary of the date of the sale. It can be filed under the cause number of the original tax suit; a separate lawsuit is not required §34.04(a). A copy must be served on all parties to the original suit, under Rule 21a of the Texas Rules of Civil Procedure, no later than the 20th day before the hearing §34.04(b). The court decides at the hearing, and its order can be appealed §34.04(e).

If no claimant establishes a right to the money within the two years, the clerk distributes it to the taxing units that took part in the sale §34.03(b). Missing the deadline means losing the money.

Who is paid, in order

At the hearing, the court orders payment in this order to each party that proves its claim §34.04(c):

1. The tax sale buyer, if the sale was declared void and the buyer won a final judgment against the taxing units.
2. A taxing unit, for taxes that came due after the judgment or were left out of it by accident or mistake.
3. Any other lienholder, such as a mortgage lender, in the priority set by law.
4. A taxing unit, for amounts in the judgment that the sale did not cover.
5. Each former owner, as their interest appears, if that owner was a defendant in the judgment, is related to a defendant within the third degree by blood or marriage, or acquired a defendant’s interest by will or intestate succession.

A former owner who acquired the property after the judgment cannot claim, except those relatives and heirs §34.04(c-1). The court does not add interest or costs to the award §34.04(d).

Mortgage foreclosure surplus

The Texas State Law Library explains that when a foreclosure sale brings more than what is owed, the excess first pays any other liens on the property, and what remains after junior liens may be available to the former homeowner State Law Library guide. Write to the trustee or substitute trustee named in your notice of sale, ask whether there was a surplus, and ask what the trustee needs from you.

We could not confirm a Texas statute that sets a claim form, deadline or fee limit for surplus a trustee holds after a mortgage foreclosure. Do not rely on a deadline someone quotes you unless they show it to you in writing. If you cannot locate the money, search ClaimItTexas, the Comptroller’s unclaimed property site.

Documents to gather

• The clerk’s notice of excess proceeds and the cause number of the tax suit.
• Proof that you were a defendant in the tax judgment, or proof of your relationship to a defendant, or the will or heirship papers through which you inherited the interest §34.04(c)(5).
• Identification and proof of your former ownership, such as the recorded deed.
• For lienholders: proof of the lien and the amount due.
• For a mortgage foreclosure: the notice of sale that names the trustee, and the sale date.

Fee limits for Texas excess proceeds

• An attorney’s fee to obtain excess proceeds for an owner may not be more than 25 percent of the amount obtained or $1,000, whichever is less §34.04(i).
• A person who is not an attorney may not charge a fee to obtain excess proceeds for an owner §34.04(i).
• Someone may take an assignment of your claim only on or after the 36th day after the money is deposited in the court registry, in a writing you sign, not as the result of an in-person or telephone solicitation, and only if they pay you at least 80 percent of your claim on the day of the assignment, with a sworn statement covering the details §34.04(f).
• The court cannot award an assignee more than 125 percent of what the assignee paid you §34.04(j), and an assignee who skips these rules is liable to you §34.04(g).

These rules are in the Tax Code and apply to tax sale excess proceeds. For mortgage foreclosure surplus held by a trustee, we could not confirm a Texas fee cap. Either way, you can file yourself; see how to claim surplus funds yourself and our overview of surplus recovery companies.

Texas excess proceeds come with a firm two-year limit, a set order of payment and strict fee limits, and the clerk’s notice gives you the law in writing. Compare other states in our surplus funds by state table, and confirm your dates with the court clerk.