How to Recover Surplus Funds in Hawaii County, Hawaii: County-Level Guide

Understanding Tax Sale Surplus Funds in Hawaii County

When real property in Hawaii County accumulates delinquent real property taxes, the local government has the statutory authority to seize and sell the property at a public tax auction to recover the unpaid debts. In many instances, the winning bid at a public tax sale exceeds the combined total of the delinquent taxes, penalties, interest, legal costs, and administrative fees owed to the county. The remaining balance generated by the public auction is known as surplus funds, excess proceeds, or tax sale overage.

Under Hawaii law, these excess funds do not automatically belong to the local government. Instead, they represent equity that legally belongs to the former titleholder or eligible lienholders who held a recorded interest in the property at the time of the tax sale. Recovering surplus funds in Hawaii County—which encompasses the entire Big Island of Hawaii, including Hilo and the Kona district—requires navigating county-specific procedures alongside state statutory guidelines.

The Role of the Hawaii County Real Property Tax Division

In Hawaii County, tax sales and the management of surplus funds fall under the authority of the County of Hawaii Department of Finance, specifically its Real Property Tax Division. The Director of Finance serves as the tax collector for the county and oversees the public auction process, the accounting of auction revenues, and the eventual disbursement of remaining funds.

Unlike states where tax enforcement is administered at the municipal or court level, Hawaii operates on a county-centric system for real property taxation. The Hawaii County Real Property Tax Division maintains primary records regarding properties scheduled for auction, bid results, total tax satisfaction amounts, and uncollected surplus balances. Anyone seeking to verify or claim excess proceeds must interact directly with the Real Property Tax Division offices, located in Hilo at the Aupuni Center and in Kona at the West Hawaii Civic Center.

How Delinquent Tax Sales and Notices Are Published

To comply with constitutional due process and statutory requirements, Hawaii County provides public notice before conducting any real property tax sale. The Department of Finance publishes lists of delinquent properties subject to tax foreclosure through several channels:

• Local Newspapers of General Circulation: Official notices of tax sales are published in local newspapers distributed within Hawaii County, such as the Hawaii Tribune-Herald (serving East Hawaii) and West Hawaii Today (serving West Hawaii).
• County Notice Boards: Physical notices are posted in public areas, including county administrative buildings and courthouse bulletin boards in Hilo and Kailua-Kona.
• Official County Portal: The Hawaii County Real Property Tax Division routinely posts upcoming tax sale notices, property listings, and auction results on its official county web portal.

Following the completion of an auction, the Real Property Tax Division compiles an accounting of the sale. If excess proceeds are generated, the division holds those funds in a trust or designated account pending verification of valid claims.

Statutory Framework: Hawaii Revised Statutes Chapter 246

Tax sales and the distribution of surplus funds in Hawaii County are governed primarily by state law under Chapter 246 of the Hawaii Revised Statutes (HRS), which regulates Real Property Tax administration.

Key statutory considerations include:

• HRS § 246-56 (Tax Deeds and Redemption): Hawaii law provides a statutory one-year redemption period following a tax sale. During this period, the former owner or designated parties may redeem the property by paying the purchase price plus statutory interest and costs. The existence of the redemption period can impact the timing and processing of surplus fund disbursements.
• HRS § 246-60 (Disposition of Surplus Proceeds): State law dictates that excess funds remaining after satisfying all taxes, assessments, interest, and costs of sale must be held for the benefit of the persons lawfully entitled to them. If unclaimed after the statutory period, remaining funds may eventually escheat to the state under Hawaii's unclaimed property statutes (HRS Chapter 523A).

Because state statutes set the broad legal boundaries, Hawaii County enforces specific administrative rules for verifying claimants before disbursing funds.

Step-by-Step Claim Procedure for Hawaii County Excess Proceeds

Recovering surplus proceeds in Hawaii County involves a structured administrative process designed to verify identity, ownership, and priority rights.

Step 1: Verification of Surplus Availability

Before initiating a claim, contact or inspect records at the Hawaii County Real Property Tax Division to confirm that a tax sale occurred, that excess proceeds exist after satisfying all county tax liabilities, and the exact dollar amount held by the Department of Finance.

Step 2: Preparing the Required Documentation

Claimants must compile a complete documentation packet to substantiate their legal right to the funds. Standard requirements include:

1. Proof of Ownership or Interest: A certified copy of the recorded deed, title policy, or mortgage instrument establishing that the claimant held valid title or a recorded lien at the moment of the tax sale.
2. Government-Issued Identification: Valid photo identification (e.g., driver's license or passport) for individual claimants or corporate formation documents for entity claimants.
3. Notarized Claim Form / Affidavit: A formal written claim affidavit detailing the claimant's legal standing, contact information, social security number or TIN, and a sworn statement that the claim is accurate.
4. Lien Satisfaction Records: If applicable, proof that existing mortgages, judgment liens, or mechanics' liens have been satisfied or waived.

Step 3: Submitting the Claim

The completed, signed, and notarized claim packet must be submitted to the County of Hawaii Department of Finance, Real Property Tax Division. Submissions can be delivered in person to the Hilo or Kona offices or sent via certified mail.

Lienholder vs. Former Owner Priority Dynamics

Under Hawaii law, excess proceeds stand in the place of the foreclosed real estate. Consequently, encumbrances that attached to the property prior to the tax sale maintain their relative legal priorities regarding the surplus funds.

• First Priority – Lienholders: Recorded mortgage holders, judgment creditors, mechanics' lienholders, and homeownership association (HOA) assessment liens take precedence over the former property owner. Lienholders must prove the outstanding balance owed at the time of sale.
• Second Priority – Former Titleholders: The former fee-simple owner receives surplus proceeds only after all valid, timely filed claims by superior lienholders have been fully satisfied.

When multiple claims exist, the Department of Finance may require claimants to resolve priority disputes or may refer contested funds to the Circuit Court via an interpleader action.

Rules on Third-Party Representation and Assignments

Former property owners sometimes engage third-party asset recovery companies to assist in filing surplus claims. In Hawaii, assignment contracts are subject to strict scrutiny. Assignment agreements must be in writing, clearly disclose the total amount of excess proceeds available, state the exact percentage or fee charged by the representative, and be executed with proper notarization. Hawaii County authorities will independently verify that the original owner fully understands the assignment before disbursing funds to a third party.

Common Pitfalls in Hawaii County Surplus Claims

• Confusing Redemption with Surplus Recovery: Attempting to claim surplus funds without recognizing how the one-year statutory redemption period affects property rights.
• Failing to Clear Prior Liens: Submitting an owner claim while superior recorded liens remain unaddressed, leading to administrative delays or rejection.
• Incomplete Notarization or Documentation: Submitting unnotarized affidavits or failing to provide proof of identity matching the recorded deed name.
• Missing Statutory Deadlines: Delaying the claim process until the funds are transferred to the Hawaii State Director of Finance as unclaimed property, which shifts the claim procedure from the county level to the state level.

Summary

Recovering surplus funds from a tax sale in Hawaii County requires a clear understanding of both county administrative procedures and Hawaii Revised Statutes Chapter 246. By verifying surplus balances with the Department of Finance, assembling certified ownership records, addressing prior lienholders, and submitting a notarized claim packet, property owners and entitled creditors can successfully reclaim their funds.

Legal Disclaimer

Disclaimer: This guide is provided for educational and informational purposes only and does not constitute legal advice. Surplus fund recovery procedures and statutory interpretations are subject to change. Consult a qualified attorney licensed in the State of Hawaii for assistance with specific legal matters.

Official Tax Sale List

Hawaii County tax sale list