🔁 Overview: What Are Excess Proceeds?

🧾 Step-by-Step Distribution Process

✅ 1. Funds Held in Court Registry

• Under §34.03(a):After the tax sale, any excess proceeds are paid into the registry of the court.

• The District Clerk is required to hold those funds for 2 years from the date of the sale, unless a court orders distribution sooner.

📬 2. Notice to Former Owner

• Within 31 days of receiving the funds, the clerk must:

  • Send certified mail to the former owner's last known address.

  • Include:

    • The amount of excess proceeds.

    • Notice of their right to claim the funds under §34.04.

    • A copy of §§34.03 and 34.04.

🧑‍⚖️ 3. Filing a Claim (Petition)

• Anyone with a legal claim to the proceeds must file a petition within 2 years of the sale.

• Petition must be served on all parties to the original foreclosure suit per TRCP Rule 21a.

• There is no separate filing fee since it’s part of the original case.

⚖️ §34.04(c) – Priority of Claims to Excess Funds

When multiple parties file claims, the court distributes the funds in this specific order:

1. Tax Sale Purchaser (if sale is later voided and the purchaser prevails in a §34.07(d) lawsuit against taxing units).

2. Taxing Units for:

   • Taxes that became due after the judgment.

   • Or taxes that were omitted from the judgment by accident or mistake.

3. Lienholders (e.g., mortgage holders or IRS, in accordance with lien priority law).

4. Taxing Units again for:

   • Any unpaid amounts from the original judgment that weren’t covered by the sale proceeds.

5. Former Owner(s) of the property:

   • Must have been a named defendant in the judgment, related within the 3rd degree to such a person, or acquired interest by inheritance (will or intestate).

🔒 Note:Former owners who acquired an interest after the judgment date (e.g., through a deed recorded later) cannot claim unless they fall under the exceptions above.

🕓 4. What Happens If No One Claims?

• If no valid claim is made within 2 years, the clerk distributes the funds to the taxing units that file claims, based on the above priority order.

🔒 Additional Rules:

• No interest or costs are awarded on claims.

• Assignments of claims are not valid unless they follow strict requirements in §34.04(f).

• The clerk may deduct postage costs from the proceeds for sending notice.

🧠 Real-World Tip:

The former owner does not get first priority. This is a common misconception. The court honors claims based on strict priority, and lienholders and taxing entities may get paid first.