Recovering Surplus Funds After a Tax Sale in Alabama

Quick summary: When a county sells property for unpaid taxes and the sale brings in more money than is needed to pay the taxes, interest, penalties, and sale costs, the extra money (the “surplus” or “overage”) does not automatically belong to the purchaser. Under Alabama law the surplus generally belongs to the former owner first and to lienholders in order of priority. There is a statutory process and timeline to claim those funds. This article explains the typical steps to find and recover surplus funds in Alabama and where to look in the Alabama Code for controlling law.

Detailed answer — how the surplus-recovery process works in Alabama

1. What is a surplus (overage)?

When the county holds a tax sale the county applies the winning bid to the unpaid taxes, accrued interest and penalties, advertising and sale costs, and sometimes collection fees. If the sale price exceeds those amounts, the county holds the extra money as a surplus. That surplus may be claimable by the prior owner and certain lienholders.

2. Who has a right to the surplus?

Priority generally follows the same ordering as other claims against the property: the former owner has the primary right to recover any excess sales proceeds, followed by junior lienholders (for example, mortgages or judgments recorded before the tax lien was satisfied by the sale) in the order of their recorded priority. County statutes and procedures determine exact priorities and distributions.

3. Where the law about tax sales and surplus funds is located

Alabama’s rules for collecting ad valorem taxes and conducting tax sales are found in Title 40 of the Code of Alabama. For the main statutory framework governing tax sales and related procedures see Title 40, Chapter 10 of the Code of Alabama (Code of Alabama, 1975, Title 40). You can review the text of Title 40 on the Alabama Legislature website: Code of Alabama – Title 40, Chapter 10.

4. Typical steps to recover surplus funds

1. Confirm whether a surplus exists and how much. Contact the county tax collector, county revenue commissioner, or the county probate office where the sale was conducted. Ask for the tax sale docket, the sale certificate, and the accounting of amounts applied to taxes and costs. County records should show whether the sale price exceeded the total charges.
2. Identify who is entitled to the surplus. Check the county’s records for prior deeds and liens. The former owner and any recorded lienholders (mortgagees, judgment creditors) with priority ahead of or behind the tax lien may have rights to the surplus. The county may have a statutory order for distributing surplus proceeds; review county procedures and Title 40.
3. File a formal claim with the county. Counties commonly require a written claim and supporting documentation showing identity and interest (for example: deed, mortgage or lien instrument, a valid ID, and proof of ownership or lien priority). Some counties have a specific claim form or require a petition to the probate court. If you are the former owner, provide proof of ownership (deed) prior to the tax sale.
4. If the county refuses or there is a dispute, file a court action. Where the county or a third party contests the claim, a claimant may need to bring suit (for example, an interpleader or civil action) in the appropriate Alabama court to establish entitlement and secure distribution. The proper court can vary by county and the amount in controversy—probate courts or circuit courts commonly hear these matters.
5. Collect the funds after approval or judgment. If the county approves a claim or the court enters a judgment directing distribution, the county or the plaintiff will issue payment. Expect the county to require original documentation and to follow any mandated notice or waiting periods.

5. Important timing and procedural rules

Alabama law imposes deadlines and procedural steps for tax sales and related claims. Missing a statutory deadline can bar recovery. The specific time limits and procedural details vary depending on the stage of the sale (pre-sale notices and redemptions) and post-sale distribution rules. Consult Title 40, Chapter 10 for the statutes that set deadlines and procedures or ask the county probate office for local practice and forms: Code of Alabama – Title 40, Chapter 10.

6. Common outcomes

• If the former owner timely claims the surplus and there are no superior claims, the county usually pays the former owner the excess proceeds.
• If lienholders hold valid enforceable liens with priority, the surplus may pay those lienholders in priority order.
• If no one claims the money and statutory time periods expire, the county may retain or escheat the funds according to state law and local rules.

How to begin right now — practical checklist

• Contact the county tax collector or probate office where the property was taxed and request the tax sale record and satisfaction accounting.
• Gather proof of identity and interest: deed, title abstract, recorded mortgages/judgments, payment records, and photo ID.
• Ask the county what form or petition you must file to claim surplus funds and whether there is a filing deadline.
• If the county denies your claim or you face competing claims, consult an attorney experienced in Alabama tax-sale or real property litigation about filing a claim in court.

Helpful hints

• Act quickly. Administrative deadlines and statute-of-limitations issues can block recovery if you wait too long.
• Get certified copies of deeds and lien instruments from the county recorder/registrar to prove your priority and interest.
• Ask the county whether they maintain a surplus or unclaimed funds list; some counties publish lists of unclaimed tax-sale overages.
• If multiple parties claim the same surplus, prepare for a court proceeding where the judge will determine priority and distribute funds.
• Even if you are an owner facing a tax sale, there may be a period to redeem the property before the sale is final; recovering surplus is separate from redemption rights—check Title 40 for redemption rules.
• Use local resources: county tax offices, probate courts, and the Alabama Department of Revenue can answer county-specific procedures.

Where to find the law and county rules

Primary statutory text for tax sales in Alabama is in Title 40 of the Code of Alabama. The Alabama Legislature provides access to the Code online: Code of Alabama – Title 40, Chapter 10. For county practice and claim forms, contact the local county probate office or county tax collector.

When to consider hiring a lawyer

Hiring a lawyer can help when:

• the county refuses to release a legitimate surplus;
• competing claimants dispute priority;
• you need to file a court action to establish entitlement; or
• the legal or factual issues are complex (multiple liens, title disputes, or sizable sums).

Disclaimer: This article is educational and general in nature and does not provide legal advice. It is not a substitute for advice from a licensed attorney about your particular situation. Laws and procedures change; consult the Code of Alabama and local county offices or an attorney to confirm current rules that apply to your case.