Understanding the Constitutional Protections
Introduction
In the realm of property law, foreclosures can result in significant financial and emotional distress
for homeowners. One critical aspect of the foreclosure process is the surplus claim, where
taxpayers may claim any excess proceeds from the foreclosure sale after satisfying the debt.
However, if foreclosed taxpayers fail to file a notice of intent to claim a surplus within a short
window—typically 90 days on or before July 1 following the March 31 judgment of foreclosure—they
might feel they have no recourse. Fortunately, the Fifth Amendment of the United States
Constitution offers a potential remedy through federal court.
The Surplus Claim and Its Deadline
When a property is foreclosed upon, it is often sold to satisfy the outstanding mortgage or tax debt.
If the sale amount exceeds the debt, the remaining funds, known as surplus proceeds, are rightfully
the former property owner’s. To claim this surplus, taxpayers generally need to file a notice of intent
within a specified period, often a 90-day window that ends on or before July 1 following the
foreclosure judgment.
Failure to meet this deadline typically results in the forfeiture of the surplus to the county treasury.
This stringent timeline can leave many former homeowners without the financial relief they need.
Federal Court Remedy Under the Fifth Amendment
The Fifth Amendment to the United States Constitution includes a clause that states, “nor shall
private property be taken for public use, without just compensation.” This provision, known as the
Takings Clause, ensures that if the government takes private property for public use, the owner
must be fairly compensated.
In the context of foreclosure, former homeowners can argue that the surplus proceeds from the
foreclosure sale represent their private property. If the county treasurer retains this surplus without
the homeowner’s opportunity to claim it—especially due to a missed deadline—the homeowner
may have grounds to seek just compensation under the Fifth Amendment.
Legal Precedents and Implications
Several court cases have addressed the issue of surplus proceeds and the application of the
Takings Clause. In these cases, federal courts have sometimes recognized the right of former
homeowners to seek compensation when their surplus is retained by the county.
It’s important to note, however, that each case can be unique, and the outcome depends on various
factors, including state laws, the specifics of the foreclosure process, and judicial interpretation of
the Fifth Amendment.
Conclusion
While missing the surplus claim deadline can seem like an insurmountable obstacle, former
homeowners still have a potential remedy through federal court. The Fifth Amendment’s Takings
Clause provides a constitutional safeguard that may entitle former property owners to just
compensation for their surplus proceeds. Those affected should seek legal advice to explore this
option and understand the best course of action based on their circumstances.