Surplus is the money left after a lien sale pays your unpaid rent, fees and sale costs. That money belongs to the tenant, so you must hold it for the period your state sets, and in most states you must tell the tenant it exists. This guide is general information, not legal advice. Have an attorney review how you handle sale money before your first sale.
The order of payment
Statutes list who gets paid first. The usual order:
- Sale costs. Advertising, auctioneer fees and other costs the statute allows.
- Prior lienholders. Creditors with a perfected security interest. North Carolina and Arizona list them before the owner's lien.
- Your lien. Rent, late fees and charges the lease allows.
- Surplus. To the tenant or the person entitled.
Arizona's order is sale costs, non-subordinated lienholders, the operator's lien, subordinated lienholders, then the occupant on demand (A.R.S. 33-1701). Washington applies proceeds to costs of sale, then the lien (RCW 19.150).
Worked example: Texas
Say you sell a unit in Texas. The tenant owed $330 in rent and fees. Ad and sale costs were $85. The winning bid is $1,100.
- Costs and lien: $330 + $85 = $415.
- Surplus: $1,100 - $415 = $685.
You send the tenant written notice of the $685 excess at the last known address and hold it. If the tenant asks within two years, you pay it. After two years you own the excess, and Texas does not require you to send it to the state (Prop. Code ch. 59; see Texas).
Worked example: Pennsylvania
Same sale, same numbers, in Pennsylvania. You hold the $685 for delivery on demand. If it is unclaimed within six months after the sale, it is deemed abandoned and must be reported and paid to the State Treasurer (12 Pa.C.S. Chapter 56). Keeping it would be a mistake.
Worked example: California
Same sale in California. You keep the $685 on the tenant's behalf. The tenant or a person with a court order may claim it within one year. After that, you pay the remainder to the county treasury where the sale was held (B&P 21700 et seq.).
Holding periods and unclaimed money by state
| State | Hold period | If unclaimed | Source |
|---|---|---|---|
| Arizona | 90 days | Pay to the Department of Revenue | A.R.S. 33-1701 |
| Washington | 6 months | Turn over as abandoned property | RCW 19.150 |
| Pennsylvania | 6 months | Report and pay to the State Treasurer | 12 Pa.C.S. Ch. 56 |
| Alabama | 1 year | Becomes the operator's property | Ala. Code 8-15-40 |
| California | 1 year | Pay to the county treasury | B&P 21700 |
| Minnesota | 1 year | State unclaimed property account | 514.971 |
| Texas | 2 years | Owner keeps | Prop. Code ch. 59 |
| Florida | 2 years | Deemed abandoned, owner has no further obligation | 83.806 |
| Georgia | 2 years | Unclaimed property law | 10-4-213 |
| Ohio | 2 years (if mail is returned) | Unclaimed funds under ORC ch. 169 | Ohio ch. 5322 |
| Colorado | 3 years | Becomes the owner's property | C.R.S. 38-21.5-103 |
| Nebraska | Remit within 30 days | State Treasurer, no holding period | Neb. 69-2301 |
The pattern is not tidy. Some states let you keep unclaimed money, some require you to send it to the state, and one, Nebraska, requires you to remit it within 30 days. Look up yours on the lien laws by state page. In other states in our research, such as New York, the storage section does not address surplus, so ask your attorney. See also the auction process.
Notice to the tenant
Some statutes require you to tell the tenant about the surplus. Texas requires written notice at the last known address. Florida requires notice of the balance delivered in person or by first-class mail with a certificate of mailing. Maryland and Ohio require the balance to be mailed by certified mail. Even where not required, send notice. It protects you.
Handling the money
- Open a separate account. Do not mix surplus with operating money.
- Record the sale. Date, price, costs, lien amount and surplus.
- Send notice where required, and keep proof.
- Calendar the deadline. Write down the date the hold ends.
- Pay claims to the tenant or a person with proof of right (a court order where the statute asks for one).
- After the period, keep it or remit it as your state says, and document that too.
- Keep records for several years. Ask your attorney how long.
Lienholders and other claimants
A lender with a security interest in the tenant's goods may claim the proceeds. Colorado requires the owner to check for a Secretary of State financing statement before enforcement. California lets a secured creditor with a perfected interest pay the preliminary notice amount to take the property. Missing a lienholder can expose you to claims, so check records and send required notices.
Common mistakes
- Keeping all the sale money.
- Mixing surplus with operating funds.
- Assuming the Texas rule applies in your state.
- Not tracking the date the hold ends.
- Paying a stranger who calls without proof of right.
- Forgetting costs you can lawfully deduct, or deducting ones you cannot.
- Not noticing prior lienholders.
Checklist
- Confirm your state's order of payment.
- Add up sale costs, with receipts.
- Compute the lien amount from the ledger.
- Compute the surplus.
- Send notice if required.
- Hold the money in a separate account.
- Calendar the end of the hold.
- Decide, by statute, whether to keep, remit or deliver.
If you run several lien sales a year, a system that records each step helps. Stitch lien and auction management keeps lien timelines by state. For the notices before the sale, use the auction advertisement template. This guide is general information, not legal advice. Review how you hold and distribute sale proceeds with an attorney.