Why Is A Condominium Foreclosure Subject To A Different Standard In The Recovery Of Attorneys' Fees Than A Bank In A Mortgage Foreclosure When It Is Authorized To Foreclose On A Lien In The Same Manner As A Bank Foreclosing On A Mortgage On Real Property?
New Jersey has a strong public policy against fee-shifting in lawsuits (i.e. requiring the losing party to pay the attorneys' fees of the winning party) – which follows the "American Rule". Yet despite same, there are numerous exceptions to the American Rule – for example, in matters where the right to collect legal fees is included in a contract between parties, and certain types of actions where attorneys' fees are expressly authorized by a court rule or state or federal statute. The right to recover attorneys' fees in both mortgage foreclosures and condominium foreclosures are both authorized by the same court rule but under different subsections.
The part of the rule that allows for the recovery of attorneys' fees in mortgage foreclosures requires the use of a formula to calculate the attorneys' fees recoverable in such actions, depending upon the amounts awarded to the bank in the underlying lawsuit. For example, if the bank is awarded $5,000 or less on its claim, attorneys' fees must be calculated at the rate of 3.5% of the awarded amount. A minimum amount of $75.00 and a maximum of $7,500.00 in attorneys' fees may be awarded in any mortgage foreclosure action, although the court has the discretion to award more than the $7,500.00 cap if the bank can prove its entitlement to additional fees.
The very same rule, although in a different section, allows for the recovery of attorneys' fees in condominium foreclosures because they are authorized by a statute known as the New Jersey Condominium Act (the "Act").
Although the Act specifically provides that condominium liens for unpaid assessments may be foreclosed by suit in the same manner as a foreclosure of a mortgage on real property, it also provides for the collection of "reasonable attorneys' fees", provided that it is expressly authorized in the master deed and by-laws. The Act does not require the use of a formula in calculating the amount of attorneys' fees based on the amounts awarded to the condominium for unpaid common assessments. Rather, the "reasonableness" of the fees awarded is left to the discretion of the court, based upon the sufficiency of the proofs submitted by the condominium in its application for such fees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
