More On Legal Fees To Lender…
When a mortgage contains a proper clause providing payment of legal fees to a foreclosing mortgagee in the event of a default (which most often it does – but not always) such an award can be expected. And although the law on this subject is surprisingly lengthy and essentially well settled [See for example 3 Bergman On New York Mortgage Foreclosures, Chap. 26, Legal Fees, LexisNexis Matthew Bender (rev. 2024)], some aspects remain muddy.
A new case, while confirming one principle, adds more unneeded mud [25th Street Multifamily, LLC v. 208-214 E. 25th St, LLC, 233 A.D.3d 574, 226 N.Y.S.3d 1 (1st Dept. 2024)].
The legal fee ruling in the cited case is short enough to present here in full for analysis purposes:
“Supreme Court ‘s award of attorneys’ fees, which reduced the fees from $597,049.79 to $515,000, was reasonable and supported by the affirmation of counsel, which described the services rendered, detailed contemporaneous time records, and provided proof of payment of the invoices via bank statements and Federal Reference wire transfer confirmations…”
While typically legal fees are awarded based upon papers submitted, that is, without necessity of a hearing, the notion that such should the rule was only addressed a few years ago. Yes, if the plaintiff’s attorney submits an affirmation of services rendered with the contemporaneous bills appended, and in the absence of any persuasive opposition, legal fees can be awarded. That view, albeit more indirectly, was acknowledged in the new case.
Next of relevance here, it has long been accepted that the fee agreed to be paid by the foreclosing party to its attorney is not the measure of legal fees to be decreed by the court. Rather, the standard of “reasonableness” must prevail. Why then would this court have mentioned, and apparently relied upon a demonstration of proof of payment of the legal fee invoices? It simply should not be a factor. So this is a bit of a mystery and adds unneeded confusion to the equation.
Finally, and perhaps the continuing contributor to the noted fuzziness is the reduction of fees by the trial court from $597,049.79 to $515,000, affirmed by the Appellate Division as “reasonable and supported by the affirmation of counsel…”. It is assumed that the Appellate Division did not comment upon the reduction as reasonable but the final fee awarded as reasonable. Assuming that is not a source of disarray, the ultimate query is, without any opposition stated, how is it that the court so substantially reduced the legal fees even the face of a complete presentation as to the reasonableness of the legal fees incurred? That actually is the problem often encountered by foreclosing parties. Some courts reduce legal fee requests by some whole percentage which of course can vary: 50%, 30%, 25%, most often with no explanation as to why the reduction was imposed. Just as nothing was explained about the reduction in the case being considered, so too such is encountered not infrequently in foreclosure cases. This case offers no enlightenment and the incurrence of fees paid without compensation by foreclosing parties continues to be a meaningful concern.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2024), is a partner with Berkman, Henoch, Peterson & Peddy, P.C. in Garden City, New York. He is also a member of the The American College of Real Estate Lawyers, a fellow of The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.