There are a few exceptions, like an uncontested quiet title action or uncontested probate, but generally the length of time and amount of work involved in a case depends very much on what the other side does. If the opponent files a motion, you will have to respond. That slows things down and creates more work — i.e. more fees.

The same is true for actions the judge takes in the case.  Judges impose deadlines and, sometimes, take other actions.  The lawyer has to respond accordingly.

And, what if you settle the case along the way?  What about appeals?  What if the case is removed to federal court?

You get the idea.  It is essentially impossible to tell a client just how much a lawsuit will end up costing.  However, that does not mean you cannot have some idea of what to expect.   That is the purpose of this article.

General Rule 1:  It is less expensive to defend a case than to prosecute a case.  It is up to the Plaintiff to move the action forward, so the pressure is on the Plaintiff to get things done.  With some exceptions, it is usually less work for a Defendant because the Defendant has the luxury of doing nothing until the Plaintiff forces the issue.

General Rule 2:  State court is less expensive than Federal court.

Now, the different stages of a lawsuit are predictable, so we can break down what happens at each stage and come up with some ballpark idea of the costs and fees for each — though always with the caveat that things can be more or less expensive depending upon what the other side does.

Stage 1 – Initiation

If you are the Plaintiff, then your lawyer will need to draft the Complaint and Summonses to get things started.  Depending upon the complexity of the case, that could take around five (5) hours of work.   Remember, the lawyer (and staff) first has to understand the case and go through the evidence to determine a strategy.  Then, the writing can begin.  So, it is going to be a couple of grand or so just for the research and drafting.

Then, when the Complaint is ready, the Court charges a filing fee.  The amount may vary a bit, but it is probably in the range of $400 to $600.  (Caveat:  It’s much more than that if your the plaintiff in a foreclosure action.)

After that, the Complaint and Summons have to be served by a process server.  You can have the Sheriff’s department do that, which is cheaper, but they take longer . . . and you cannot really bug them to hurry up.  Most people go with a private process server, which will cost around $100 per defendant.

So, if you add it all up, you are looking at something like $2,500-3,500 to get the case off the ground.

If you are the Defendant, then you only need to file a response to the Complaint.  There are a few different types of responses you might file, such as a Motion to Quash, Motion to Dismiss, or an Answer with Defenses.  Your lawyer will decide which approach is best, but any one of these responses is about 1-3 hours of drafting.  So, you are looking at about $800-1,000 for each of these responses.  Bear in mind your attorney may use just one of these responses or, perhaps, all three, depending upon the situation and your overall case strategy.

Stage 2 – Discovery

This is the stage where the parties get information from the other side or third parties.  There are cases that require only minimal discovery or, even, no discovery at all.  Also, the type of discovery utilized makes a big difference in costs.  So, results may vary wildly at this stage.

There are three types of written discovery requests:

• Interrogatories,
• Request to Produce, and
• Request for Admissions.

These “discovery products” are somewhat predictable and template-based.  So, it is simply a matter of drafting requests that are specific to your case.   You can expect about 2-3 hours of work ($800-1,600) per discovery product.  Your lawyer will decide whether to use some or all of these discovery options.

Depositions  –  Another common discovery tool is taking a deposition.  That’s a different beast altogether. 

First, you may have to issue a subpoena, which is additional drafting.  And, you’ll need a court reporter present to transcribe the proceedings.  That’s an added costs.  Nowadays, depos are often done by videoconference, which makes things more convenient but — in my experience — not really less expensive.

But the main thing is that grilling a deponent in person is very often a full-day affair (or, even, multiple days).  Once you go to the trouble of getting the person in the seat and under oath, you will want to take full advantage.  And, usually, the deponent will put up some resistance, which slows things down.

So, you can expect a single deposition to cost between $1,000-5,000.  Depos are much more expensive but, depending on the deponent and the case, the can be very effective.  Think about it.  Nobody likes being deposed, so you can really put some pressure on the other side with this technique.  If that leads to a quicker settlement, then it was worth every penny.

Rounds of Discovery

For complex cases, you may have to go through more than one round of discovery.  So, your lawyer may be sending out a first set, second set, third set, etc.  If so, multiple the estimate above by the number of sets that go out.

Motion Practice

Another thing to keep in mind is the motion practice that can happen at this stage.  For example, if the party receiving the discovery request does not respond, or does not provide good responses, then your lawyer will have to file a Motion to Compel and, probably, go to a hearing.  That additional motion practice means additional expense.  Call it about $1,000 for a motion to compel and hearing attendance, assuming remote appearance (Zoom) is permitted.

Stage 3 – Summary Judgment

Some cases can be disposed in whole or in part without going all the way to trial, such as cases based on a contract.  That usually happens by filing a Motion for Summary Judgment.  If you are the Plaintiff, you are hoping to end the case with this motion, so your lawyer is going to put some extra time into researching and drafting this motion.  Again, if this works, it will be worth every penny, so you might as well give it your best shot.

Then, there will be a hearing on the motion.  I would estimate the whole process will take from 3-6 hours of work ($1,200-3,000), depending upon the complexity of the issues.

Stage 4 – Trial

Summary judgment is for cases that do not involve evidentiary issues.  In other words, the judge is not required to hear testimony or deal with disputed facts.  Whenever that is not possible — which is most often — then the case will have to be decided through a trial.

H&S deals mostly with business and real estate disputes, which do not typically call for a jury.  So, the analysis here is on non-jury trials.  Just bear in mind there are additional steps (and, therefore, additional cost) involved for jury trials.

Preparation

All the exhibits and witnesses have to be prepped.  The research has to be finalized and all the evidence reviewed — i.e. we want no surprises at trial.  The strategy needs to be discussed, and everybody involved, including you, has to be ready to go.  It’s a big deal.

Show Time

Then, there is the trial itself, which can take one day or a week, depending on the case.  So, again, results can vary wildly.  But, just to give you some idea, this stage is likely to cost somewhere in the range of $3,000, for a relatively simple case, to $10,000 for a fairly complex case.  I’m referring, of course, to typical small business litigation in State court.  Obviously, big corporate cases are a different statosphere.

Other Costs

Another thing you probably need to count on is mediation.  At some point, one of the parties will ask for mediation, or the judge will simply send you to mandatory mediation in the hope of getting the case settled and off the docket.  That will be a full day of work, plus the mediator’s fees, so count on $2,000-$3,500 for that.

Then, there are appeals.  There is even something called an “interlocutory appeal,” which can happen before the case is actually decided.  So, there can be costs of appeal both during and after the case.  There is no “motion practice” in appeals, and oral arguments are somewhat uncommon, so the costs are fairly predictable.  But, appellate work is notoriously expensive because the level of “lawyering” goes up.

Conclusion

Hopefully, the analysis herein helps you to better understand the factors involved in litigating a case, so you can better prepare and make informed decisions.  Never forget that a case can settle anywhere along the way, which puts an end to the expenses.

I’ve also done a video on this topic, which you can access here.

~ Jeff Harrington, Esq.

¿Estás pensando en demandar a alguien? ¿O tuvo una mala experiencia en un pleito? No se pierda esta discusión inusualmente franca sobre los lados buenos, malos y feos del litigio.

The purpose of this article is to make both parties aware of the common considerations after default on a commercial lease. 

Uncollectible Tenants

Personal Guaranty

It is hard to blame a commercial landlord for insisting on payment of every dime owed, but that does make it nearly impossible to cut a deal quickly.  So, very often, we end up with Scenario #2, which is protracted litigation.

Real Estate Litigation

Once the lawsuit starts, it’s basically for “all the marbles” because the landlord will be entitled to ALL the costs and fees resulting from this lawsuit, along with unpaid rents and other damages.

But, be aware, landlords.  Sometimes the commercial tenant does have an exit strategy.

I realize that all sounds good from the landlord’s perspective.  Just remember, though, getting a judgment is one thing.  Collecting on the judgment can be quite another.

Executing on the Judgment

The tenant may start transferring assets out of the landlord’s reach.  If you start seeing the tenant’s attorney utilizing delay tactics in the lawsuit, it may be that the tenant needs time to get the asset-protection plan in place.  

Conclusion

Foreclosures

1. Single-Family Mortgagor.  First and foremost, the order only protects so-called “single-family mortgagors.”  The Governor’s choice of verbiage leaves a bit open to interpretation, but it is likely the following types of mortgages are not subject to the moratorium:
   • Commercial loans
   • Residential loans on multi-family properties
2.  Affected by Covid-19.  It might not be too difficult for residential borrowers to show they have been affected by the Pandemic, but there are some who might not qualify.  For example, our firm represents some online businesses that have done just fine over the past months.  Some may even have benefited from the shut-down.  So, while the order is not clear, it is certainly possible that the onus will be on the borrower to prove a Covid-19-related hardship in order to avoid foreclosure.
3. Other Grounds for Foreclosure.  The order specifically states the Order will not prevent foreclosure on grounds other than non-payment of the mortgage.  At this point, one would imagine some lenders, at least, are getting pretty desperate for their mortgage income.  One strategy you might see is lenders getting creative about the grounds for foreclosure.  Is the failure to provide funds for insurance and tax escrows considered non-payment of the mortgage?  Maybe.  What about other provisions in the mortgage that might have been breached?
4. Final Action.  Also, note the Governor’s Order only prevents the “final action” concluding a foreclosure action.  So, that means lenders can go ahead and initiate their foreclosures anytime.  They might even be able to get final judgments in place.  While unclear, the “final action” referenced in Executive Order 20-180 probably means holding the foreclosure auction of the property.  Or, maybe, “final action” means the property can be auctioned, but the owners cannot be removed under a Writ of Possession.  In any event, you get the point.  There is much the lender can do during the pendency of the Order.  And, some aggressive lenders may well do so.
5. Non-Forgiveness.  As with the previous Orders, this Executive Order 20-180 does not make the past due mortgage payments go away.  The past due balance continues to accumulate whether or not the lender is currently prevented from actually taking possession of the property.  That is why many experts believe there will be a wave of foreclosures as soon as the Pandemic Relief measures are lifted.  By that time, some borrowers, at least, will find themselves several months in arrears.  If they were unable to make the mortgage payments on a monthly basis, they certainly will not be able to make a lump-sum payment for several months of past-due payments.

Evictions

1.  Residential Tenants.  First and foremost, the order only protects so-called “residential tenants.”  So, commercial tenants are not protected at this point.
2.  Affected by Covid-19.  It might not be too difficult for residential tenants to show they have suffered economically as a result of the Pandemic, but there are some who might not qualify.  It remains to see how individual judges will handle this, but it is certainly possible that it will be up to the tenant to demonstrate a Covid-19-related hardship in order to avoid eviction.
3. Other Grounds for Eviction.  The order specifically states the Order will not prevent eviction on grounds other than non-payment of rent.  Rental agreements generally have a fair number of provisions other than payment of rent, which a landlord could use as an excuse for eviction.  It would almost certainly be easier for landlords to use this loophole than it would be for lenders.  Given the level of frustration many landlords are experiencing, I would expect we will see some evictions for failure to maintain the property, excessive noise, parking violations, etc.
4. Final Action.  In the case of evictions,  the “final action” is probably execution of the Writ of Possession.  So, that means landlords can initiate their eviction actions and, probably, obtain a final judgment.  They could have the Sheriff ready and waiting to remove the tenants the moment the moratorium is lifted.
5. Non-Forgiveness.  As with the previous Orders, this Executive Order 20-180 does not make the past due rental payments go away.  The past due balance continues to accumulate whether or not the landlord is currently prevented from actually taking possession of the property.  Since eviction is generally considered less traumatic than taking someone’s property, it is predictable that — while the State or Federal government may provide some protection to homeowners — tenants will be at the mercy of their landlords.  Landlords may not see this as a great time to have their properties vacant, so that would be the only real incentive to work with their tenants.  Still, it is hard to imagine that tenants will ever be able to catch up on several months of past-due payments.  Many will probably walk away.

Whether you are a lender, borrower, landlord or tenant, you should consult your real estate attorney for information and strategies regarding the current Pandemic and the aftermath that is sure to come.

~ Jeff Harrington, Esq. 

Local governments in Florida have the authority to regulate the types of uses and their intensity on properties within their boundaries.  Every city and county in Florida is required to adopt a comprehensive plan that provides “the principles, guidelines, standards, and strategies for the orderly and balanced future economic, social, physical, environmental, and fiscal development of the area that reflects community commitments to implement the plan.” Section 163.3177(1), Florida Statutes.

In accordance with their comprehensive plans, cities and counties adopt future land use maps which chart a course for development within their jurisdictions.  Some examples of land uses identified on future land use maps include low-density residential, high-density residential, commercial, industrial, conservation, and institutional.

A proposed development can only be approved by the local government if it is consistent with the underlying land use for the designated property.  For example, a “low-density residential” land use may restrict real estate development to five (5) residential units per acre.  Any use that would exceed those limits (such as a multi-family apartment complex) would be inconsistent.

However, some local governments in an effort to expand their tax base or increase revenue may amend their land use plans to create land use designations that may be inconsistent with their surrounding area.  A local government may approve a change to the land use map which creates a high density residential area adjacent to a low density residential area.  The end result would be rows of multi-family apartments housing up to 300 families surrounded by single-family homes.  The impacts on traffic and infrastructure would be devastating to the established single-family neighborhood.  These negative impacts are what comprehensive plans are designed to prevent.

Our real estate and land use attorneys can assist you and your neighbors in presenting and preparing valid challenges to local government action.  The key to bringing such a challenge is to act quickly upon receiving notice from the local government of a proposed change to a property’s land use.  Notice is usually in the form of a certified mailing from the city or county, or the appearance of signage on the proposed site of development. Sections 163.3184, 163.3187, and 163.3125, Florida Statutes, provide methods for residents to challenge the decision of the local government which would result in a land use or real estate development that is inconsistent with the city or county’s comprehensive plan.

Contact our office if you would like to challenge an inconsistent development.

~ Jeff Harrington, Esq.

Our law firm was recently retained to defend against clear attempts by Ocwen to force the homeowner into foreclosure.  We have seen that before, and there certainly is no shortgage of complaints by homeowners against Ocwen’s practices as a loan servicing company.  Ocwen has already been sued by 49 state attorneys general, settling for $125 Million, and there have been class actions against Ocwen in Pennsylvania and California.

What is particularly noteworthy about Ocwen is that their misconduct tends to be egregious and, even when they are clearly on the wrong side of the law, they don’t budge from their position until lawyers get involved.

So, it has been our experience so far that Ocwen will eventually pay or otherwise do the right thing — but you WILL have to force the issue through litigation.  Our firm has have very good success against Ocwen.  And, it is always shocking to me just have far we have to take things to get the result.

I do not know if Ocwen’s stubborness — even when they are clearly in the wrong — is a strategic business decision, or if they are just too disorganized to avoid these situations.  I suppose neither would surprise me.

If Ocwen has adopted this policy on a nationwide level, are they betting enough homeowners will roll over to make it worthwhile — even if they do have to deal with a few pesky multi-million-dollar lawsuits?

What I do know is there is a fresh batch of homeowners that have been victimized by Ocwen’s predatory practices.   So . . .

CALLING ALL HOMEOWNERS WITH A GRIPE AGAINST OCWEN LOAN SERVICING COMPANY.  LET’S START A JOINT ACTION IN FLORIDA.

Call our office for a free consultation and more information.

~ Jeff Harrington, Esq.

Right to Deficiency Judgment

Why would a lender be entitled to a deficiency judgment?  After all, in most non-judicial foreclosure states, the lender cannot sue for the deficiency.  In California, where our firm has an office, lenders can foreclose on properties without having to bring a lawsuit.  (The onus is on the homeowner to file suit in order to prevent the foreclosure.)  The trade-off is that the lenders cannot seek to recover any difference remaining on the loan after re-sale of the property–i.e. the “deficiency.”

Also, didn’t these lenders receive large payments from the government and insurance companies to cover their loses when the housing bubble bursted?  If so, isn’t giving them the house on top of that kind of having your cake and eating it too?  If so, then I suppose giving them a deficiency judgment in addition to the bailout money and the property would be a bit like having your cake, eating it too, and then being given a cupcake to go with it.

While we can debate the fairness of deficiency judgments — and we should — Florida Statute §702.06 does provide mortgagees the right to seek a deficiency judgment upon foreclosure or short sale of the subject property.  Until last year, Florida courts have done little to curb that right.

Protections Against Deficiency Judgments

In a few districts, if the plaintiff purchased the note at a substantial discount, the court may not allow a deficiency judgment.  See Jonas v. Bar-Jam Corp., 170 So. 2d 479, 480 (Fla. 3d DCA 1965).  In today’s world, where most loans are sold multiple times, this protection can be very valuable.  That is only available where the local court adheres to this policy.[2]

Another potential protection exists in that the statute puts the award of deficiency judgments “within the sound discretion of the court.”  That means a judge has the power to deny or limit requests for deficiency judgments.  Some judges are actually sympathetic to the plight of homeowners going through foreclosure and might use their discretion to provide what protection they can.

 Also, no deficiency judgment is available where the market value of the property is greater than the amount due on the loan.  This did not used to come up very often since almost all real property in the country was “upside-down.”  However, the market has been steadily on the rise now for the last several years and many properties are back to even, or at least close to it.    And, if the house is only a little bit “upside-down,” then it probably is not worth the time and money it would cost the bank to obtain a deficiency judgment.  Thinking from this prospective leads us to the business considerations that weigh heavily in the way lenders actually handle these matters.

July 1, 2014 Deadline

In actuality, even though lenders in Florida do have the right to seek a deficiency judgment, they very rarely do.  The most intuitive explanation for this restraint is that lenders believe (i) it may be difficult to obtain a worthwhile judgment, and (ii) even if they get a judgment, they will not be able to collect on it.  (I doubt lenders have a problem with the ethics of having your cake and eating it too.)

Lenders will typically attempt to get as much financial information from the borrower as possible during the foreclosure or loss mitigation process.  One obvious reason is to determine collectability of a deficiency judgment.  In theory, if the deficient amount is substantial and the borrower has assets to pay the judgment, then the bank is incentivized to go after the deficiency judgment.  As a practical matter, however, banks are not law firms and they are not particularly interested in spending their time and resources litigating.  So, typically lenders will “write off” the deficiency and use the loss as a tax deduction.

I have seen lenders sell their cause of action—that is, their right to seek a deficiency judgment—to a third party.  There are companies and individuals out there who buy up judgments and causes of action for pennies on the dollar and then attempt to collect.  That has happened, and we have seen these collection agencies file some deficiency actions in order to beat the new deadline of July 1, 2014.

The Florida legislature decided to give Florida homeowners some sense of certainty by requiring deficiency actions be filed by the deadline for all foreclosure cases completed (i.e. issuance of the certificate of title) prior to July 1, 2013.  Further all new foreclosure cases now have a 1-year limitations period for filing deficiency actions.

That means once the foreclosure is over, the plaintiff has one year to file for deficiency.  After that, you are in the clear.

As for the old cases, some deficiency actions have indeed been filed, but not as many as some people were expecting.  The specter of bankruptcy is likely a factor.

Home loans are secured debts that are not dischargeable through bankruptcy.  However, once the deficiency is considered unsecured debt.  Therefore, even where the lender or some third party is successful in obtaining a deficiency judgment against the borrower, the borrower has the option of declaring bankruptcy and erasing the debt.

In the wake of the economic crisis, many people have been forced into bankruptcy even without the consideration of a deficiency judgment.  Since any deficiency judgment worth pursuing is likely to be quite large, it seems likely many homeowners would seek bankruptcy protection to avoid the debt.  This consideration is no doubt a powerful deterrent to lenders and third parties.  After all, they would not want to go through all the time and expense of obtaining a deficiency judgment just to see it melt away in bankruptcy proceedings.

White Paper on Taxation of Foreclosure Debt

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Jeffrey Harrington, Esq.

[1] The analysis here, is limited to Florida, a state that requires judicial foreclosure, because in non-judicial foreclosure states—such as California—deficiency judgments are virtually a non-issue.

[2] Be awaree the court’s decision in Ahmad v. Cobb Corner, Inc., 762 So. 2d 944, 947 (Fla. 4th DCA 2000) flatly rejects this restriction to deficiency ju

Bankruptcy

Bankruptcy may not be a good solution for some people either because they have too many assets or because they need to protect their credit rating; however, it is the most obvious solution, so let’s start there.

It is true that a mortgage is secured debt, which cannot be discharged in bankruptcy . . . with certain caveats.  First of all, when the amount of the mortgage is greater than the value of the home–a situation we call being “upside-down” or “under water”–then you can think of the mortgage as having two parts: the secured portion and the unsecured portion.  In bankruptcy, we call this an “undersecured” mortgage.

The secured portion of the loan is the amount equal to the value of the property.  Theoretically, the lender will resell the property at that price and recover that portion of the mortgage.  The portion the lender won’t recover, the unsecured portion, is the difference remaining on the mortgage after resale of the property.  The amount of that difference is often called the “deficiency.”

The good news is the unsecured portion of the debt, or the “deficiency,” is dischargeable in bankruptcy.  So, if you are worried about a deficiency action, filing a bankruptcy will certainly solve the problem.  If bankruptcy is not a good option for you, don’t despair.  You have other defenses.

Determining the Amount of the Deficiency

In order for a judge to issue an order requiring you to pay a deficiency, the judge has to be convinced as to what the amount of the deficiency is.  That can be very hard to do.

Let’s take a scenario where the final judgment is entered for $200,000.  Then, the property is sold at a judicial auction for $100,000.  That would mean the deficiency is $100,000, which is the remaining difference, right?  Well . . . probably not.

First of all, just because the property was auctioned for $100,000 does not mean that is the true market value of the property.  In fact, it almost certainly means the property is worth more than $100,000 because no bidder would pay the actual market value at a judicial auction.  (These days, in some parts of the state, the bidding has gotten so competitive that some bidders might actually pay the full market value.  Nonetheless, the argument is still good.)

So, if the auction price is not good evidence of the market value, how can  the lender establish to the satisfaction of the court the correct value?  An professional appraisal would probably work, as long as it is done right after the final judgment.  Even though the real estate market has been on the rise, you have no control over the property once the foreclosure goes through.  What happens if the property is neglected?  Unkept landscape, code violations, unpaid association assessments, mold resulting from no air conditioning, vandalism, and many other conditions arising after you lose the property could unfairly lower the market value.

The same argument would work against BPOs (broker’s professional opinion) and CMAs (comparative market analysis) as well, which are more likely to be used by the bank because they are less expensive than a full appraisal.

In most cases, the lender will be the winning bidder at the judicial auction and will take over the property.  Institutional lenders are slow-moving behemoths that usually take a long time to get around to doing something with foreclosed properties.  That delay can give you an excellent defense.

This lack of certainty regarding fair market value is what lead the appellate court in Empire Developers Group v. Liberty Bank to reverse a deficiency judgment.  Never forget that the lender has the burden of proof, not the borrower.  If you are the homeowner, you do not have to prove the market value was higher than what the bank says.  You simply have to show the bank’s evidence is unreliable.

That leads to the last point.  My firm has been defending foreclosure actions since the housing crisis first began, so we have a good sense of how many judges feel at this point.  There are some bank-friendly judges who would probably sign off on just about whatever the bank puts in front of them.  You may have to appeal if you get one of those judges.  However, by and large, that is not the case.  In fact, I think most judge’s have had just about enough of the robosigning, fraudulent documents, predatory lending, bailouts and overall unsavory character of the lending industry.  Not to mention they do feel some compassion for homeowners.

In my opinion, most judge’s will be resistant to granting deficiency judgments and will welcome any excuse you give them to deny the bank’s request.  It should not be too difficult to cast doubt on the evidence the bank presents, and that is all you need to do.

~ Jeff Harrington, Esq.