Who can claim surplus proceeds after a South Dakota tax sale?
If a county sells real property at a tax sale and the sale price exceeds the delinquent taxes, penalties, interest, and sale costs, the extra money (the “surplus” or “overage”) does not automatically belong to the purchaser. Former owners, mortgagees, judgment lienholders, and other parties with recorded interests may have a legal right to those surplus funds under South Dakota law. To recover those funds you must identify the proper procedure, file any required claims, and meet statutory deadlines.
Step-by-step process to recover surplus funds in South Dakota
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Confirm a surplus exists and get sale documentation.
Request the tax sale record and final settlement from the county treasurer where the property is located. The treasurer’s file should show the sale price, the amount applied to the tax judgment (taxes, penalties, interest, and fees), and the amount of any surplus.
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Determine who has priority to the surplus.
Priority typically follows the order of recorded interests: the former owner’s equity first, then recorded mortgagees and other lienholders according to their priority and the timing of their recordings. Review the county register of deeds to confirm recorded liens and the chain of title.
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File a written claim with the county treasurer (and provide proof).
Most counties require a written claim or application to release surplus funds. Include proof of your interest: deed, mortgage, assignment, lien, court judgment, or an ID showing you are the former owner. If you represent a corporate or trust interest, include documentation showing your authority to act.
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Watch for competing claims and potential court proceedings.
If multiple parties claim the same surplus, the county may hold the funds until a court resolves who has superior title or priority. Be prepared to file an action in the appropriate South Dakota court (often county circuit court) asking the court to determine entitlement and to order distribution of the surplus.
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Meet statutory deadlines.
South Dakota law sets deadlines for asserting claims or redeeming interests related to tax sales. If you wait too long, you may forfeit the right to the surplus. Contact the county treasurer immediately and consult the South Dakota Codified Laws governing tax sales and distributions to confirm deadlines. See South Dakota statutes related to taxation and tax sales here: SDCL Title 10 (Taxation) and search the codified laws for the specific provisions on tax sales and distributions.
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If the county refuses or if the claim is disputed, consider filing a court action.
Affected parties often must file a claim or interpleader in circuit court to obtain a judicial determination. The court can order the county to distribute funds to the rightful claimant(s) after considering documentary evidence and the priority of interests.
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If you cannot locate the surplus or the treasurer says it’s unclaimed, check unclaimed property rules.
Unclaimed or unclaimed-after-proper-notice funds may eventually be handled under state unclaimed property rules or by the county. If the treasurer indicates the funds have been turned over to the state or otherwise transferred, follow up with the appropriate state office (or the treasurer) to submit a claim under the unclaimed property process.
Practical examples (hypotheticals)
Example 1 — Former owner: The county sells your former property for $100,000 to satisfy $20,000 in taxes, penalties, and costs. You were the recorded owner. You file a written claim with the county treasurer attaching a recorded deed showing your prior ownership. The treasurer releases the $80,000 surplus to you after any notice or waiting period required by law.
Example 2 — Competing lienholders: A bank holds a recorded mortgage ahead of a later judgment lien. The tax sale produces a surplus. Both the bank and the judgment creditor claim the surplus. The county holds the funds while the parties ask the circuit court to determine priority. The court orders distribution according to recorded priority.
Where to look in South Dakota law
South Dakota’s codified laws address tax sales, redemption, and distribution of proceeds. For the governing statutes, begin at the South Dakota Legislature’s codified laws site for Title 10 (Taxation): https://sdlegislature.gov/Statutes/Title/10. Use the site’s search to find the sections that govern county collection procedures, tax sales, and the disposition of sale proceeds. For procedural questions about circuit court actions to determine surplus entitlement, consult South Dakota court rules and statutes governing civil actions.
Helpful Hints
- Contact the county treasurer as soon as you learn of a tax sale; they hold the records and will tell you whether a surplus exists and what their claim procedure requires.
- Gather documentary proof before you contact the treasurer: recorded deeds, mortgages, assignments, lien records, and valid identification.
- Check the county register of deeds online or in person for recorded interests that affect priority to the surplus.
- Act quickly — statutes of limitation and deadlines can strip away your rights if you delay.
- If the county will not release funds or if other claimants dispute your right, expect to file a court action and consider hiring a lawyer to prepare pleadings and evidence.
- Keep all communications in writing and get receipts or written confirmations from the county treasurer about filings and status.
- Remember that even when you prevail, counties may deduct lawful costs and fees from the surplus before distributing the balance.
Next steps
Start by contacting the county treasurer where the property was located. Ask for the tax sale docket sheet and any forms they require to claim surplus funds. If you find competing claims or encounter resistance, consider consulting an attorney who handles tax sales and real estate litigation in South Dakota.
Disclaimer: This article provides general information about recovering surplus funds after a tax sale in South Dakota. It does not constitute legal advice and does not create an attorney-client relationship. For advice about your specific situation, consult a licensed South Dakota attorney.