Recovering Surplus Proceeds When a Property Sells at a Tennessee Tax Sale

When a property is sold at a tax sale for more than the amount of delinquent taxes, interest, and sale costs, the extra money is called surplus proceeds. This guide explains how surplus proceeds are handled under Tennessee law and the practical steps a former owner or other claimant should take to try to recover that money.

Detailed Answer — How surplus recovery works in Tennessee

Step 1: Understand what creates a surplus. At a tax sale the purchaser pays an amount that covers the unpaid property taxes, penalties, interest, statutory costs, and certain fees. Any amount the purchaser pays above those legally allowed charges becomes the surplus (sometimes called excess proceeds).

Step 2: Who may be entitled to the surplus? Typical claimants (in order of priority) include:

The former property owner (most common claimant).
Junior lienholders whose liens were wiped out or affected by the sale.
Other parties with a recorded interest or a court-ordered right to proceeds.

Priority and precise rights vary by situation. If multiple claimants exist, the county or a court will determine distribution.

Step 3: Where the surplus is held and how to locate it. After the sale the county trustee, clerk, or other local official involved in the tax sale will have the sale record and will be the place to start. Ask the county trustee’s office for the tax sale file and a statement showing the sale price, the amounts applied to taxes and costs, and whether any surplus was generated.

Step 4: Filing a claim. In most Tennessee counties you must submit a written claim to the local official holding the proceeds. That claim should:

Identify the property by parcel number or legal description;
Show proof you are the former owner or have a superior claim (deed, mortgage, assignment, court order);
Include a government photo ID and proof of your current address;
State the amount you claim and attach any supporting documents (tax bills, payoff statements, lien records).

If the local official is uncertain who is entitled, they may hold the funds pending a court proceeding where claimants ask a judge to decide entitlement and distribution.

Step 5: Possible court involvement. When multiple claimants exist or the county requires judicial guidance, you may need to file a petition in the local court (often chancery or circuit court). The court can order distribution, require notice to known claimants, and resolve competing claims.

Step 6: Time limits and unclaimed funds. Tennessee law sets specific procedures and deadlines for tax sales and for how long certain rights continue. Because statutory timelines and the required remedies differ by type of sale and the local handling, it’s important to act quickly. Contact the county trustee promptly to learn any deadlines to claim surplus funds. For statutory background on tax collection and enforcement matters, see Title 67 (Taxation and Financial Matters) of the Tennessee Code: Tenn. Code Ann., Title 67.

Step 7: If your claim is denied. If the trustee or clerk denies your claim or multiple claimants dispute entitlement, you will usually have to ask a court to decide. Courts will review ownership records, the timing of recorded interests, and the statutory priorities.

Practical example (hypothetical)

Suppose a homeowner’s parcel is sold at a tax sale for $50,000. Delinquent taxes, interest, and costs total $20,000. The purchaser paid $50,000, so there is $30,000 in surplus. The trustee will record the sale and should identify the surplus. The former owner provides a deed and ID to the county trustee and files a written claim. If a junior mortgage holder also claims part of the surplus, the trustee may ask the court to decide how to split the $30,000.

Helpful Hints

Start at the county trustee’s office. They keep the sale file and will tell you if surplus exists and how it is being handled.
Gather documentation up front: deed, tax bills, mortgage or lien documents, sale notice, and photo ID. Clear documentation speeds claims processing.
Act quickly. Timelines for claiming surplus or bringing actions can be short. Even if you’re unsure, begin the inquiry so you don’t miss a deadline.
If the trustee refers you to court, be prepared to ask the local chancery or circuit court to determine entitlement to the funds.
Watch for multiple claimants. If other lienholders or purchasers claim rights, expect the county to require a legal determination before distributing funds.
Ask about fees. Courts or county clerks may charge filing fees or require bond; the county may deduct administrative costs before distribution.
Use official state resources. For an overview of Tennessee tax statutes and procedures see the Tennessee Code (Title 67) at the Tennessee General Assembly website: https://www.capitol.tn.gov/legislation/titles/67.html
If you are unsure how to proceed, consider contacting a Tennessee attorney experienced in tax sales or real property to explain your rights and represent you before the trustee or court.

Next steps: Contact the county trustee where the property was taxed. Request the tax sale file, ask whether surplus proceeds exist, and ask what specific claim form or petition your county requires.

Disclaimer: This article explains general Tennessee procedures and is for informational purposes only. It is not legal advice, does not create an attorney-client relationship, and should not be relied on as a substitute for consulting a licensed Tennessee attorney about your particular situation.