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Deerbrook II Condominium Association v. Zarella

A-5469-03T3 (N.J. Super. App. Div. 2005) (Unpublished)

CONDOMINIUM ASSOCIATIONS; ATTORNEYS FEES — When it comes to assessing a delinquent unit owner with attorneys fees arising out of a collection action, the Rules of Professional Conduct trump the Condominium Act and the condominium documents in determining the appropriateness of the amount charged.

A condominium association sued a unit owner for nonpayment of maintenance fees owed to the association pursuant to the master deed and bylaws. Those documents expressly required each unit owner to pay his or her proportionate share of the maintenance, repair, and administration costs for the common elements assessed by the board of directors. The master deed also provided for a delinquent unit owner to pay the association’s legal fees incurred to collect past due maintenance as permitted by the Condominium Act. The unit owner was served with the summons and complaint, but failed to respond. A default was entered. The association’s attorney sent the court clerk the necessary forms to obtain a default judgment and received a card from the clerk’s office indicating that a default judgment (which included the association’s legal fees) was entered in the amount requested. Three months later, the court clerk discovered that the judgment was entered improperly because the association did not submit a condominium fee information form which was required prior to the entry of judgment. The association’s attorney completed and submitted the form. The lower court’s final judgment reduced the amount of the attorney’s fees from the actual amount incurred to an amount equal to twenty percent of the amount of the assessment. It also reduced the monthly late fees charged by the association.

The association appealed, claiming that the lower court arbitrarily limited its attorney’s fees to a percentage of the maintenance charged owed by the unit owner when the Condominium Act and the condominium’s master deed provided for the payment of a reasonable fee. The Appellate Division affirmed the lower court award. It based its decision on a supplemental letter filed by the lower court in which it explained the basis of his reduction. It had relied on the Rule 1.5 of the Rules of Professional Conduct and determined that RPC 1.5 trumped the Condominium Act and the master deed when deciding to award attorneys’ fees. The lower court decided that, based on RPC 1.5, the legal fee requested was not justified based on the time and labor required to obtain the judgment or by the amount involved. It noted that the legal fees requested were about as much as the amount of the delinquent maintenance charges. The lower court also determined that, in its opinion, the late fee, which amounted to between 18% and 22% of the amount of the monthly maintenance charge, was also excessive. The Appellate Division, while acknowledging that the lower court’s determination was conclusory, nonetheless found its analysis to be correct and upheld the award.

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