Detailed Answer
When a property undergoes a foreclosure sale in Massachusetts, any sale proceeds exceeding the foreclosing creditor’s claim become “surplus funds.” Under Massachusetts General Laws Chapter 244, Section 14 (M.G.L. c. 244, § 14), the court orders the sale and holds surplus funds for distribution to parties with valid claims. To determine whether other creditors or lienholders could claim these funds, follow these steps:
- Search Recorded Liens and Encumbrances: Examine the Registry of Deeds for the county where the property lies. Look for recorded mortgages, attachments, or UCC filings. Massachusetts law requires recording to perfect a lien (M.G.L. c. 183, § 3).
- Check Judgment Liens: Search the Land Records Index and the civil docket in the county clerk’s office for judgment liens filed under M.G.L. c. 224, § 3. A recorded judgment lien attaches to real estate and may share in surplus funds.
- Review Mechanic’s and Materialmen’s Liens: Contractors, subcontractors, and suppliers may record liens under M.G.L. c. 254, § 1. Search the Registry within 90 days of project completion for these claims.
- Inspect Condominium and HOA Liens: Condominium associations record liens under M.G.L. c. 183A, § 6. Homeowner associations enforce liens per governing documents. Check association filings and condo records.
- Consult Tax Lien Records: Property tax liens under M.G.L. c. 60, § 57 and federal tax liens by the IRS often appear in the Registry. Verify both municipal and federal lien indexes.
- Review Court Filings for Attachments: Search Superior and District Court records for attachments or writs of garnishment tied to the property. These create enforceable interests once recorded.
- Analyze Priority Rules: Massachusetts follows “first in time, first in right.” Earlier recorded liens take priority over later claims (M.G.L. c. 183, § 3).
- File a Court Motion to Distribute Surplus: If you identify potential claimants, file a motion in the foreclosure action under M.G.L. c. 244, § 35. The court will notify all interested parties and schedule a hearing to adjudicate competing claims.
If no other creditor establishes a valid claim within court timelines, the surplus funds go to the former owner. A court hearing resolves disputes among claimants and confirms final distribution.
Helpful Hints
- Use the county Registry of Deeds online portal for free preliminary lien searches.
- Order a certified title report to uncover unrecorded or overlooked claims.
- Contact the municipal tax collector to verify outstanding property tax arrearages.
- Review foreclosure sale documents and court notices for listed creditors.
- Consult a real estate attorney if you identify complex or high-value competing claims.
Disclaimer: This article provides general information on Massachusetts foreclosure and surplus fund procedures. It does not constitute legal advice. For guidance specific to your circumstances, seek counsel from a licensed attorney.