Tuesday, August 11, 2009

Legal Newspapers: Dinosaurs of the Digital Age

The time has come for the General Assembly of the State of Georgia to rethink the monopoly granted to legal newspapers in the 159 Georgia Counties [1]. The State of Georgia needs to create one centralized state database for all statewide legal notices (including all individual county notices) and completely eliminate county based legal advertising notices. This database should be available to the public on the internet and compatible with Boolean searches.

This article will show that the Legal Newspapers printed in 159 Georgia Counties fail to accomplish their stated purpose in the modern digital age. That is:

1) Legal Newspapers do Not Provide Effective Notice;

2) A Centralized State Electronic Database Will Provide Notice; and,

3) Legal Newspapers presently exist not to provide Notice, but to capture monopoly profits.

The fundamental goal of any legal advertisement is to provide Notice. However, the current patchwork quilt of 159 independent newspapers all printing legal advertisements on any day at any time they choose, does not provide adequate Notice in this modern digital, blackberry® driven age.

I. The Entire Purpose of Notice is “Notice.”

In an age when citizens obtain sports scores, news headings, and download songs onto their I-Pod, they find themselves locked out of the most basic legal notices affecting their lives. There is no searchable cost effective public database that presently contains legal notices.

Notice in a Civil Action is codified at OCGA Code § 9-11-4. [2] The entire purpose of that statutory scheme is to provide Notice of a legal proceeding to a defendant or an interested party. That statute requires an interested party be notified of an action within five days of the filing of an action, unless some excuse is made for due diligence. If a party cannot be located after a diligent search, OCGA 9-11-4(f)(1)(C) [summons or other service] provides for service on the defendant or interested party by publication. Publication subsequent to the court order is made as follows: "The clerk shall cause publication to be made in the paper in which the sheriff's advertisements are printed, four times within the ensuing 60 days." Id.

While a defendant residing in Atlanta might, per chance, search the Legal Organ of Fulton County, the Fulton County Daily Reporter, It is highly unlikely (absurd, actually) that a defendant residing in Atlanta would search the Legal Organ in Liberty County, Ben Hill County, Mitchell County, Toombs County or some other county hundreds of miles from Atlanta.

It is not only the distance that impacts a defendant's ability to receive Notice, but the fact that the Notices are owned and published by 159 disjointed publishing houses. Those publishing houses charge to view that information that fundamentally “public.”

In this digital age, it cannot be accepted as a matter of common sense (to be distinguished from legal sense) that actual Notice is provided by an obscure publication in some distant county that is not available and searchable on the internet.

There is no question that the legal information contained inside the publication itself is a matter of public domain. While it is not a perfect analogy, the General Assembly indicted some years ago that “public records,” should be open to the public. OCGA § 50-18-70. While Legal ads are “open,” they are not accessible and/or available to the public in any useful format.

For those of us who are required to search the legal advertisements, we know that if you don’t take a subscription to some legal newspaper in an outlying county – then when that legal paper is gone [meaning its many weeks old] it is gone. You have to either ask for an archive search or pay an additional fee for that newspaper’s online database to search an historical legal ad. The information, while public, is not accessible. It hides behind that monopolistic paid wall of the local Legal Organ.

II. A Centralized State Electronic Database Will Provide Notice

A centralized electronic state database will provide Georgians with actual Notice. The current 159 paper publications (some are electronic, but they are not centralized) in the 159 counties do not provide any centralized form of Notice for the citizens of the State of Georgia.

There are three (3) empirical reasons why a statewide database will work as opposed to the 159 paper printings. The historical experience with the GSCCCA, the centralized UCC filings and the Georgia Secretary of State’s Office, provide clear reasons why the Georgia should move to centralize all county legal advertising.

GSCCCA. The Georgia Superior Court Clerks Cooperative Authority (GSCCCA) provides online access to 123 million legal documents filed in the 159 counties in Georgia. The electronic database or GSCCCA has received over 1 billion hits since the initiation of its online searchable database. It is difficult to imagine the world as it existed prior to 1995 with regard to land records in Georgia.

With the GSCCCA, anyone at any computer terminal in Georgia with the proper passcode can access any one of the 123 million deeds, security deeds and other land instruments presently on file in Georgia.

The UCC. The Uniform Commercial Code was first published in 1952 and has been enacted by all states. It has been a long term joint project of the National Conference of Commissioners on Uniform State Laws. While Georgia did not enact the UCC until some years after its initial introduction in 1952, it was clear both from the drafting of the UCC and its implementation that a dual filing system was necessary to provide actual “Notice.” A uniform financing statement may be filed in the local county courthouse, but it may also be centrally filed in Atlanta. Thus, in the days before the internet, the wisdom of the drafters of the UCC knew that a UCC filed in some outlying distant county many hundreds of miles from the state capitol provided no Notice and no real method for determining whether a financing statement existed on a fleet of trucks in a distant county. A hand search of the same financing statement made in Atlanta would show whether the fleet of trucks in the outlying county was, in fact, subject to a prior financing agreement.

The Georgia Secretary of State. The entire e‑filing revolution associated with the Georgia Secretary of State's office shows the power of statewide centralization of records. In the early 1990s, many law firm’s had one employ designated to dial 404‑656‑2817 and reach a live person at the Georgia Secretary of State's, Corporations Division. Sometimes, if our employee ever got through on the phone, we might be able to determine the “Register Agent,” for a Corporation. When the Governor set out to revolutionize the Georgia Secretary to State's office under the "e‑revolution," the Secretary of State's databases moved online as one of the first databases in the nation. Attorneys were suddenly able to research very substantial amounts of data at the Secretary’s Office without a physical visit to Atlanta.

Notwithstanding the clear teachings of the centralization of the GSCCCA, the UCC and the Secretary of State’s Office, the General Assembly continues to allow legal advertisements in Georgia to be published in an incomprehensible maze of 159 legal publications scattered throughout the state.

III. OCGA § 9-13-142 Provides Legal Newspapers With A Monopoly that Impedes Centralization.

Legal newspapers in all 159 counties have a monopoly with respect to the publication of legal advertisements pursuant to OCGA § 9‑13‑142. [3] That statute provides that one official newspaper or official organ of the county shall be designated for the publication of sheriff sales, citations of the probate court judges, or any other advertising commonly known in terms of "official or legal advertising.”

Other than owning and maintaining a monopoly over the publication of legal information, it is clear that the newspapers provide no "service," in their delivery or dissemination of the legal advertisements. The Governor's Office of Consumer Affairs in 2009 published "[I]nformation in the official Notices [the legal advertisements] comes directly from the lenders [and the public] with no independent verification." Thus, the legal newspapers provide no additional value added other than the raw assembly of and dissemination of legal advertisements to the public.

The two recent Georgia Supreme Court decisions on the Legal Newspapers reveal fights not designed to improve service to the community or to provide a better system of Notice to the general population, but rather reveal a fight over the ownership of the monopoly to publish in a particular county. Crescent Newspapers, LP., et al. v. Dorsey, et al., 269 Ga. 41, 497 S.E.2d 360 (1998) (revealing a fight over ownership of the Legal Organ in DeKalb County) and Henry County Record, Inc. v. Community Newspapers Holding, Inc., 274 Ga. 353, 554 S.E.2d 150 (Ga. 2001). (resolving a Dispute over the qualifications to be the Legal Organ in Henry County).

IV. Conclusion

The General Assembly should consider the purpose of legal Notice and eliminate the arcane and byzantine method of Notice presently provided by a 159 profit-motivated entities that do not work together for the common good of Georgians.

A centralized searchable database will achieve the goal of providing “Actual Notice.” A centralized database will allow citizens to search Notice on the internet on a Centralize Database. And, a centralized Database will end the costly and inefficient monopoly of Legal Newspapers in Georgia.

Hugh Wood
Atlanta, GA



[1]

Georgia has 159 Counties. "By 1800, Georgia consisted of 24 counties. An explosion in the number soon followed, with 53 new counties creating during the following 27 years. In Dec. 1831, Georgia claimed authority over all Cherokee and Creek lands in Georgia. Twelve months later, the legislature designated all Cherokee lands within the state as "Cherokee County" (see map). This was a huge area that never really functioned as a county, so In Dec. 1832 the legislature created ten counties out of Cherokee County - including a much smaller county by the same name. Georgia now had a total of 89 counties.

A new era in the history of Georgia counties followed. As no Indian territory remained in Georgia, the only way to create new counties was by dividing existing ones. Organizing a new county simply required passage of an act in the General Assembly. It was an easy process, and during the decade of the 1850s, 39 new counties were created by the legislature.

By 1875, the number of counties had grown to 137, with no end in sight. To stop this explosion, a new state constitution in 1877 prohibited the legislature from creating any more counties in Georgia (see provision). For 16 years, the number of counties was frozen at 137. But state lawmakers were pressured for more. In 1904, the General Assembly proposed amending Georgia's constitution to allow 145 counties. Voters approved the change, meaning the 1905 General Assembly would have the chance to create 8 new counties. The House of Representatives created a New County Committee, which was busy the entire session considering 23 petitions to form new counties. Late in the session, legislators approved 8 new counties - the maximum allowed after the 1904 constitutional amendment. But the pressure to create new counties continued." Jackson, Ed, A Brief History of Georgia Counties, Carl Vinson institute of Government, University of Georgia (2000).

[2]

O.C.G.A. § 9-11-4. Process.
(a) Summons -- Issuance. Upon the filing of the complaint, the clerk shall forthwith issue a summons and deliver it for service. Upon request of the plaintiff, separate or additional summons shall issue against any defendants.
(b) Summons -- Form. The summons shall be signed by the clerk; contain the name of the court and county and the names of the parties; be directed to the defendant; state the name and address of the plaintiff's attorney, if any, otherwise the plaintiff's address; and state the time within which this chapter requires the defendant to appear and file appropriate defensive pleadings with the clerk of the court, and shall notify the defendant that in case of the defendant's failure to do so judgment by default will be rendered against him or her for the relief demanded in the complaint.
(c) Summons -- By whom served. Process shall be served by the sheriff of the county where the action is brought or where the defendant is found, or by such sheriff's deputy, or by the marshal or sheriff of the court, or by such official's deputy, or by any citizen of the United States specially appointed by the court for that purpose, or by someone who is not a party and is not younger than 18 years of age and has been appointed as a permanent process server by the court in which the action is brought. Where the service of process is made outside of the United States, after an order of publication, it may be served either by any citizen of the United States or by any resident of the country, territory, colony, or province who is specially appointed by the court for that purpose. When service is to be made within this state, the person making such service shall make the service within five days from the time of receiving the summons and complaint; but failure to make service within the five-day period will not invalidate a later service.
(d) Waiver of service.
(1) A defendant who waives service of a summons does not thereby waive any objection to the venue or to the jurisdiction of the court over the person of the defendant.
(2) Upon receipt of notice of an action in the manner provided in this subsection, the following defendants have a duty to avoid unnecessary costs of serving the summons:
(A) A corporation or association that:
(i) Is subject to service under paragraph (1) or (2) of subsection (e) of this Code section; and
(ii) Receives notice of such action by an agent other than the Secretary of State; and
(B) A natural person who:
(i) Is not a minor; and
(ii) Has not been judicially declared to be of unsound mind or incapable of conducting his or her own affairs.
(3) To avoid costs, the plaintiff may notify such a defendant of the commencement of the action and request that the defendant waive service of a summons. The notice and request shall:
(A) Be in writing and shall be addressed directly to the defendant, if an individual, or else to an officer or managing or general agent or other agent authorized by appointment to receive service of process for a defendant subject to service under paragraph (1) or (2) of subsection (e) of this Code section;
(B) Be dispatched through first-class mail or other reliable means;
(C) Be accompanied by a copy of the complaint and shall identify the court in which it has been filed;
(D) Make reference to this Code section and shall inform the defendant, by means of the text prescribed in subsection (l) of this Code section, of the consequences of compliance and of failure to comply with the request;
(E) Set forth the date on which the request is sent;
(F) Allow the defendant a reasonable time to return the waiver, which shall be at least 30 days from the date on which the request is sent, or 60 days from that date if the defendant is addressed outside any judicial district of the United States; and
(G) Provide the defendant with an extra copy of the notice and request, as well as a prepaid means of compliance in writing.
(4) If a defendant located within the United States that is subject to service inside or outside the state under this Code section fails to comply with a request for a waiver made by a plaintiff located within the United States, the court shall impose the costs subsequently incurred in effecting service on the defendant unless good cause for the failure is shown.
(5) A defendant that, before being served with process, returns a waiver so requested in a timely manner is not required to serve an answer to the complaint until 60 days after the date on which the request for waiver of service was sent, or 90 days after that date if the defendant was addressed outside any judicial district of the United States.
(6) When the plaintiff files a waiver of service with the court, the action shall proceed, except as provided in paragraph (5) of this subsection, as if a summons and complaint had been served at the time of filing the waiver, and no proof of service shall be required.
(7) The costs to be imposed on a defendant under paragraph (4) of this subsection for failure to comply with a request to waive service of summons shall include the costs subsequently incurred in effecting service, together with the costs, including a reasonable attorney's fee, of any motion required to collect the costs of service.
(e) Summons -- Personal service. Except for cases in which the defendant has waived service, the summons and complaint shall be served together. The plaintiff shall furnish the clerk of the court with such copies as are necessary. Service shall be made by delivering a copy of the summons attached to a copy of the complaint as follows:
(1) If the action is against a corporation incorporated or domesticated under the laws of this state or a foreign corporation authorized to transact business in this state, to the president or other officer of the corporation, secretary, cashier, managing agent, or other agent thereof, provided that when for any reason service cannot be had in such manner, the Secretary of State shall be an agent of such corporation upon whom any process, notice, or demand may be served. Service on the Secretary of State of any such process, notice, or demand shall be made by delivering to and leaving with him or her or with any other person or persons designated by the Secretary of State to receive such service a copy of such process, notice, or demand, along with a copy of the affidavit to be submitted to the court pursuant to this Code section. The plaintiff or the plaintiff's attorney shall certify in writing to the Secretary of State that he or she has forwarded by registered mail or statutory overnight delivery such process, service, or demand to the last registered office or agent listed on the records of the Secretary of State, that service cannot be effected at such office, and that it therefore appears that the corporation has failed either to maintain a registered office or to appoint a registered agent in this state. Further, if it shall appear from such certification that there is a last known address of a known officer of the corporation outside the state, the plaintiff shall, in addition to and after such service upon the Secretary of State, mail or cause to be mailed to the known officer at the address by registered or certified mail or statutory overnight delivery a copy of the summons and a copy of the complaint. Any such service by certification to the Secretary of State shall be answerable not more than 30 days from the date the Secretary of State receives such certification;
(2) If the action is against a foreign corporation or a nonresident individual, partnership, joint-stock company, or association, doing business and having a managing or other agent, cashier, or secretary within this state, to such agent, cashier, or secretary or to an agent designated for service of process;
(3) If against a minor, to the minor, personally, and also to such minor's father, mother, guardian, or duly appointed guardian ad litem unless the minor is married, in which case service shall not be made on the minor's father, mother, or guardian;
(4) If against a person residing within this state who has been judicially declared to be of unsound mind or incapable of conducting his or her own affairs and for whom a guardian has been appointed, to the person and also to such person's guardian and, if there is no guardian appointed, then to his or her duly appointed guardian ad litem;
(5) If against a county, municipality, city, or town, to the chairman of the board of commissioners, president of the council of trustees, mayor or city manager of the city or to an agent authorized by appointment to receive service of process. If against any other public body or organization subject to an action, to the chief executive officer or clerk thereof;
(6) If the principal sum involved is less than $200.00 and if reasonable efforts have been made to obtain personal service by attempting to find some person residing at the most notorious place of abode of the defendant, then by securely attaching the service copy of the complaint in a conspicuously marked and waterproof packet to the upper part of the door of the abode and on the same day mailing by certified or registered mail or statutory overnight delivery an additional copy to the defendant at his or her last known address, if any, and making an entry of this action on the return of service; or
(7) In all other cases to the defendant personally, or by leaving copies thereof at the defendant's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein, or by delivering a copy of the summons and complaint to an agent authorized by appointment or by law to receive service of process.
(f) Summons -- Other service.
(1) Service by publication.
(A) General. When the person on whom service is to be made resides outside the state, or has departed from the state, or cannot, after due diligence, be found within the state, or conceals himself or herself to avoid the service of the summons, and the fact shall appear, by affidavit, to the satisfaction of the judge or clerk of the court, and it shall appear, either by affidavit or by a verified complaint on file, that a claim exists against the defendant in respect to whom the service is to be made, and that he or she is a necessary or proper party to the action, the judge or clerk may grant an order that the service be made by the publication of summons, provided that when the affidavit is based on the fact that the party on whom service is to be made resides outside the state, and the present address of the party is unknown, it shall be a sufficient showing of such fact if the affiant shall state generally in the affidavit that at a previous time such person resided outside this state in a certain place (naming the place and stating the latest date known to affiant when the party so resided there); that such place is the last place in which the party resided to the knowledge of affiant; that the party no longer resides at the place; that affiant does not know the present place of residence of the party or where the party can be found; and that affiant does not know and has never been informed and has no reason to believe that the party now resides in this state; and, in such case, it shall be presumed that the party still resides and remains outside the state, and the affidavit shall be deemed to be a sufficient showing of due diligence to find the defendant. This Code section shall apply to all manner of civil actions, including those for divorce.
(B) Property. In any action which relates to, or the subject of which is, real or personal property in this state in which any defendant, corporate or otherwise, has or claims a lien or interest, actual or contingent, or in which the relief demanded consists wholly or in part of excluding such defendant from any interest therein, where the defendant resides outside the state or has departed from the state, or cannot, after due diligence, be found within the state, or conceals himself or herself to avoid the service of summons, the judge or clerk may make an order that the service be made by publication of summons. The service by publication shall be made in the same manner as provided in all cases of service by publication.
(C) Publication. When the court orders service by publication, the clerk shall cause the publication to be made in the paper in which sheriff's advertisements are printed, four times within the ensuing 60 days, publications to be at least seven days apart. The party obtaining the order shall, at the time of filing, deposit the cost of publication. The published notice shall contain the name of the parties plaintiff and defendant, with a caption setting forth the court, the character of the action, the date the action was filed, the date of the order for service by publication, and a notice directed and addressed to the party to be thus served, commanding him or her to file with the clerk and serve upon the plaintiff's attorney an answer within 60 days of the date of the order for service by publication and shall bear teste in the name of the judge and shall be signed by the clerk of the court. Where the residence or abiding place of the absent or nonresident party is known, the party obtaining the order shall advise the clerk thereof; and it shall be the duty of the clerk, within 15 days after filing of the order for service by publication, to enclose, direct, stamp, and mail a copy of the notice, together with a copy of the order for service by publication and complaint, if any, to the party named in the order at his or her last known address, if any, and make an entry of this action on the complaint or other pleadings filed in the case. The copy of the notice to be mailed to the nonresident shall be a duplicate of the one published in the newspaper but need not necessarily be a copy of the newspaper itself. When service by publication is ordered, personal service of a copy of the summons, complaint, and order of publication outside the state in lieu of publication shall be equivalent to serving notice by publication and to mailing when proved to the satisfaction of the judge or otherwise. The defendant shall have 30 days from the date of such personal service outside the state in which to file defensive pleadings.

[3]

OCGA § 9-13-142. Requirements For Official Organ Of Publication; How Official Organ Changed; Notice To Secretary Of State.
(a) No journal or newspaper published in this state shall be declared, made, or maintained as the official organ of any county for the publication of sheriff's sales, citations of probate court judges, or any other advertising commonly known in terms of "official or legal advertising" and required by law to be published in such county official newspaper unless the newspaper shall meet and maintain the following qualifications:
(1) "Newspaper" as used in this Code section means a printed product of multiple pages containing not greater than 75 percent advertising content in no more than one-half of its issues during the previous 12 months, excluding separate advertising supplements inserted into but separately identifiable from any regular issue or issues of the newspaper;
(2) The newspaper shall be published within the county and continuously at least weekly for a period of two years or is the direct successor of such a newspaper. Failure to publish for not more than two weeks in any calendar year shall not disqualify a newspaper otherwise qualified;
(3) For a period of two years prior to designation and thereafter, the newspaper shall have and maintain at least 75 percent paid circulation as established by an independent audit. Paid circulation shall not include newspapers that are distributed free or in connection with a service or promotion at no additional charge to the ultimate recipient. For circulation to be considered paid, the recipient of the newspaper or such recipient's employer or household must pay reasonable and adequate consideration for the newspaper. No rules of circulation of audit companies, the United States Postal Service, or accounting principles may be considered in determining paid circulation if they are inconsistent with the provisions of this subsection;
(4) Based on the published results of the 1990 United States decennial census or any future such census, the newspaper shall have and maintain at least the following paid circulation within the county for which it is designated as the legal organ newspaper:
(A) Five hundred copies per issue in counties having a population of less than 20,000;
(B) Seven hundred fifty copies per issue in counties having a population of at least 20,000 but less than 100,000; or
(C) One thousand five hundred copies per issue in counties having a population of 100,000 or greater; and
(5) For purposes of this Code section, paid circulation shall include home or mail delivery subscription sales, counter, vendor and newsrack sales, and sales to independent newspaper contract carriers for resale. Paid circulation shall not include multiple copies purchased by one entity unless the multiple copies are purchased for and distributed to the purchaser's officers, employees, or agents, or within the purchaser's household.
(b) However, in counties where no journal or newspaper meets the qualifications set forth in subsection (a) of this Code section, the official organ may be designated by the judge of the probate court, the sheriff, and the clerk of the superior court, a majority of these officers governing from among newspapers otherwise qualified to be a legal organ that meet the minimum circulation in the preceding subsection for the county, or if there is no such newspaper, then the newspaper having the greatest general paid circulation in the county.
(c) Any selection or change in the official organ of any county shall be made upon the concurrent action of the judge of the probate court, the sheriff, and the clerk of the superior court of the county or a majority of the officers. No change in the official legal organ shall be effective without the publication for four weeks of notice of the decision to make a change in the newspaper in which legal advertisements have previously been published. All changes in the official legal organ shall be made effective on January 1 unless a change has to be made where there is no other qualified newspaper.
(d) Notwithstanding the other provisions of this Code section, an official organ of any county meeting the qualifications under the statute in force at the time of its appointment and which was appointed prior to July 1, 1999, may remain the official organ of that county until a majority of the judge of the probate court, the sheriff, and the clerk of the superior court determine to appoint a new official organ for the county.
(e) During the month of December in each year, the judge of the probate court of each county shall notify the Secretary of State, on a form supplied by the Secretary of State, of the name and mailing address of the journal or newspaper currently serving as the official organ of the county. The judge of the probate court shall also likewise notify the Secretary of State of any change in the official organ of the county at the time that such change is made.
The Secretary of State shall maintain at all times a current listing of the names and addresses of all county organs and shall make such list available to any person upon request.


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

Saturday, August 1, 2009

Coming Attractions: Predatory Leasing

Under the new federal protections for tenants, foreclosure will no longer be "final," in Georgia.

Foreclosures in Georgia used to eliminate second mortgages, all junior liens and all leases. A property after foreclosure had a title about as clean as a title could be without a subsequent quiet title action ("QTA").

Under the new Helping Families Save Their Homes Act, and [``Protecting Tenants at Foreclosure Act of 2009''], leases will survive a Georgia foreclosure. This is a significant change in Georgia foreclosure law and unlike most changes to this area of property law did not come from the Georgia General Assembly but from Washington, DC.

The imposition of a post in time lease will have a significant impact on lending under Georgia law. The purpose of the law is to protect the innocent tenant who legitimately and properly entered into a year lease on a house with a landlord, unaware that the landlord is close to foreclosure. In the early 1990s we used to see this type of abuse with "wrap around mortgages," which have since fallen into disfavor. While wrap-around foreclosure concerned ownership by the second mortgagor/owner, it had the same effect on possession. The foreclosure of the first mortgage wiped out the "owner in possession," many times without notice to the owner. [Georgia does not require Notice of Foreclosure be given to the second mortgage holder.]

Under this new law, Institutional lenders will now be forced to recognize existing leases after foreclosures in Georgia.

While this will accomplish the intent of Congress, to prevent tenants from improperly losing possession of their homes for no fault of their own, it will have significant consequences on lending in Georgia.

The institutional lender will no longer look at a foreclosure title in Georgia as a completely clean title. The foreclosure will continue to wipe out second mortgages, mechanics liens, junior liens but will now be viewed as an event that will not terminate residential leases. In all likelihood, this event will be factored into the pricing of obtaining a first mortgage in Georgia and other states.

The terms of the new law contain the following significant provisions:

1) The tenant must be given a 90-day notice to quit (this is different than current Georgia law in that the longest notice in Georgia is a 60-day notice to quit);

2) The tenant will be allowed to occupy the premises until the end of the stated term of the lease, with some exception);

3) The rent stated in the term of the lease remains the same and the lender may not arbitrarily raise the rent after the foreclosure;

4) If the tenant has a month-to-month lease, or the tenant is a holdover tenant, the 90-day notice is still required. In Georgia, a tenant at sufferance may be evicted summarily. While the provisions of this new law remain somewhat murky, it would appear that a tenant at sufferance may now take advantage of the new 90-day right of notice post-foreclosure. This is a very significant change under Georgia law.

There are some significant limitations stated in the law. They are, the rent stated in the pre-foreclosure lease must be a market based rent. That is, the rent cannot be an absurdly low figure of say $200.00 and have that lease survive foreclosure. The rent must be close to the acceptable market value for rents in the local area. The tenant in lease must be a "bona fide" tenant under the terms of the lease. That is, the owner may not rent the property to his spouse, child, parents or a close relative and then assert the lease post-foreclosure. The lease is contemplated to be an arms-length transaction for a fair market rent to survive post-foreclosure.

Notice how this market rent may be used to manipulate the ability of tenants to be evicted in a post-foreclosure setting. Assume that the debt due under the first and second mortgage pre-foreclosure is $3,500.00 a month. If an investor transferred the ownership (perhaps improperly) to a new investor both the first and the second mortgage would need to be serviced at $3,500.00 a month. If however, a bona fide lease is entered into at market rates for $1,500.00 a month for the same property, the lender will be stuck with that fair market lease at $1,500.00 per month post-foreclosure. That is, the institutional lender will be forced to accept $1,500.00 a month as opposed to the true institutional value of the home which is in the range of $3,500.00 a month. This is a significant change in the economic holding of post-foreclosure properties for institutional lenders.

The new law does contain an exit clause for the institutional lender. If the lender has a contract for sale, the lender can give the tenant 90-day notice and break the post-foreclosure lease and sell the property. In the world of realty, most REO purchasers are not going to wait idly by while they spend two or three months examining and qualifying for the property and then spend another three or four months while the institutional lender evicts the tenant. Thus, the reality of marginally valued residential homes is that the institutional lender will be "stuck" with the tenant until the lease expires.

There are a number of anomalies that seem not to be discussed in this new legislation. In Georgia, a lease for a term less than five years does pass an estate in land. Thus, it would appear that the lease could be written with a mandatory option clause which would allow the tenant to extend from year to year under the terms of the original lease. Thus, an institutional lender may be stuck with a tenant for as much as 4 years and 11 months under Georgia law. No doubt this provision will be litigated. However, I am unable to determine a restriction upon lease extensions by "bona fide" tenants who enter into these leases pre-foreclosure.

No doubt, this new bill will spawn an entire industry called "predatory leasing." In predatory leasing, a "bona fide" tenant will attempt to capture a residential property at the lowest range of acceptable market rental and ride that property post-foreclosure to the end of REO process. Thus, under predatory leasing a tenant will be able to acquire a very high dollar mortgage property for the low end of the residential rental spectrum. It will take two or three years for the industry to determine how this new law impacts both its bottom line and its lending practices. However, I am convinced upon reading this bill that the lending industry will be significantly manipulated by tenants in the near future.

Welcome to coming attractions: Predatory Leasing.

Hugh Wood
Atlanta, Georgia
& & &
TITLE VII-- PROTECTING TENANTS AT FORECLOSURE ACT
SEC. 701. 12 USC 5201 SHORT TITLE.

This title may be cited as the ``Protecting Tenants at Foreclosure
Act of 2009''.

SEC. 702. 12 USC 5220 EFFECT OF FORECLOSURE ON
PREEXISTING TENANCY.

(a) In General.--In the case of any foreclosure on a federally-
related mortgage loan or on any dwelling or residential real property

[[Page 123 STAT. 1661]]

after the date of enactment of this title, any immediate successor in
interest in such property pursuant to the foreclosure shall assume such
interest subject to--
(1) Notice. Deadline. the provision, by such
successor in interest of a notice to vacate to any bona fide
tenant at least 90 days before the effective date of such
notice; and
(2) the rights of any bona fide tenant, as of the date of
such notice of foreclosure--
(A) under any bona fide lease entered into before
the notice of foreclosure to occupy the premises until
the end of the remaining term of the lease, except that
a successor in interest may terminate a lease effective
on the date of sale of the unit to a purchaser who will
occupy the unit as a primary residence, subject to the
receipt by the tenant of the 90 day notice under
paragraph (1); or
(B) without a lease or with a lease terminable at
will under State law, subject to the receipt by the
tenant of the 90 day notice under subsection (1),
except that nothing under this section shall affect the
requirements for termination of any Federal- or State-subsidized
tenancy or of any State or local law that provides longer time
periods or other additional protections for tenants.

(b) Bona Fide Lease or Tenancy.--For purposes of this section, a
lease or tenancy shall be considered bona fide only if--
(1) the mortgagor or the child, spouse, or parent of the
mortgagor under the contract is not the tenant;
(2) the lease or tenancy was the result of an arms-length
transaction; and
(3) the lease or tenancy requires the receipt of rent that
is not substantially less than fair market rent for the property
or the unit's rent is reduced or subsidized due to a Federal,
State, or local subsidy.

(c) Definition.--For purposes of this section, the term ``federally-
related mortgage loan'' has the same meaning as in section 3 of the Real
Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

SEC. 703. EFFECT OF FORECLOSURE ON SECTION 8 TENANCIES.

Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C.
1437f(o)(7)) is amended--
(1) by inserting before the semicolon in subparagraph (C)
the following: ``and in the case of an owner who is an immediate
successor in interest pursuant to foreclosure during the term of
the lease vacating the property prior to sale shall not
constitute other good cause, except that the owner may terminate
the tenancy effective on the date of transfer of the unit to the
owner if the owner--
``(i) will occupy the unit as a primary
residence; and
``(ii) <> has
provided the tenant a notice to vacate at least 90
days before the effective date of such notice.'';
and
(2) by inserting at the end of subparagraph (F) the
following: ``In the case of any foreclosure on any federally-
related mortgage loan (as that term is defined in section 3 of
the Real Estate Settlement Procedures Act of 1974 (12 U.S.C.
2602)) or on any residential real property in which a recipient
of

[[Page 123 STAT. 1662]]

assistance under this subsection resides, the immediate
successor in interest in such property pursuant to the
foreclosure shall assume such interest subject to the lease
between the prior owner and the tenant and to the housing
assistance payments contract between the prior owner and the
public housing agency for the occupied unit, except that this
provision and the provisions related to foreclosure in
subparagraph (C) shall not shall not affect any State or local
law that provides longer time periods or other additional
protections for tenants.''.
SEC. 704. 12 USC 5201 note. 12 USC 5220 note. 42 USC 1437f
SUNSET.
This title, and any amendments made by this title are repealed,
and the requirements under this title shall terminate, on December 31, 2012.
Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
Phone: 404-633-4100
Fax: 404-633-0068

Thursday, July 30, 2009

How Much Does it Cost to Redeem Tax Sale Property in Georgia?

If you find yourself behind the Eight Ball and the County has sold your house or property to a third party for nonpayment of taxes, don’t despair. You can redeem your property unless and until the purchaser bars the right of redemption (foreclosure of the right of redemption). Until the foreclosure of your ownership is barred, you can redeem your property. However, it is expensive.

The Georgia Code allows the tax deed purchaser interest of 20% the first year and 10% for each year, or fraction of a year, thereafter.

Lets look at a redemption example:

Suppose your house is worth $200,000 and you haven’t paid the taxes on it in two years. The taxes are $4,000 per year.

Lets assume your house goes to tax sale and a buyer purchases it for $30,000.00 and the unpaid taxes for 2 years of $8,000.00 is included in the purchaser's bid. Pretermitting the discussion on how to make money on the “excess proceeds,” the tax sale purchaser bought your house via tax deed for $30,000.00.

The next year the purchaser pays the your tax, another $4,000, and writes you a letter telling you he is foreclosing the tax deed. He then publishes in the legal newspaper to foreclosure your ownership. [You have been living in your house the entire time.]

How much do you have to pay to stop his tax foreclosure?

$30,000.00, the amount paid at the sale,

Plus 20% for the first year,

$6,000.00

Plus 10% for each year or fraction of a year thereafter,

$3,000.00,

Plus the additional taxes paid by the purchaser in the 2nd year after the tax sale,

$4,000.00,

Plus the publication and costs of publication, if redemption occurs more than 30 days after Notice,

$500.00 (approximate – this quote is, perhaps, high).

So, the grand total to get your tax sale house out of tax deed hock, is $43,500.00 -- all because you failed to pay your $4,000 tax per year. Ouch.

You must get the cash or cash equivalent funds to the tax purchaser “before” the date stated in the Notice passes. If you go beyond the date – its curtains for your title and ownership.

The relevant statutes are listed at then end of this article.

Hugh Wood
Atlanta, GA



Note: This is a really basis analysis of the redemption. A bank escrow, which is likely on even a $200,000 house, would stop the tax foreclosure. It is probable that the bank would foreclose on your unpaid mortgage balance before the County reached the sale of your tax deed. Each redemption is different and the minutiae of the numbers seem hard to calculate. [I have fought with folks over whether they had to pay the Certified Mail costs to redeem.]

& & &

CODE OF GEORGIA
Title 48. REVENUE AND TAXATION
Chapter 4. TAX SALES
Article 3. REDEMPTION OF PROPERTY SOLD FOR TAXES
Current through 2008 Legislative Session


O.C.G.A. § 48-4-40. Persons Entitled To Redeem Land Sold Under Tax Execution; Payment; Time.

Whenever any real property is sold under or by virtue of an execution issued for the collection of state, county, municipal, or school taxes or for special assessments, the defendant in fi. fa. or any person having any right, title, or interest in or lien upon such property may redeem the property from the sale by the payment of the redemption price or the amount required for redemption, as fixed and provided in Code Section 48-4-42:
(1) At any time within 12 months from the date of the sale; and
(2) At any time after the sale until the right to redeem is foreclosed by the giving of the notice provided for in Code Section 48-4-45.

O.C.G.A. § 48-4-41. Redemption By Creditor Without Lien.

If the property is redeemed by a creditor of the defendant in fi. fa. who has no lien, the creditor shall have a claim against the property for the amount advanced by him in order to redeem the property if:
(1) There is any sale of the property after the redemption under a judgment in favor of the creditor; and
(2) The quitclaim deed is recorded as required by law.

O.C.G.A. § 48-4-42. Amount Payable For Redemption.

The amount required to be paid for redemption of property from any sale for taxes as provided in this chapter, or the redemption price, shall with respect to any sale made after July 1, 2002, be the amount paid for the property at the tax sale, as shown by the recitals in the tax deed, plus any taxes paid on the property by the purchaser after the sale for taxes, plus any special assessments on the property, plus a premium of 20 percent of the amount for the first year or fraction of a year which has elapsed between the date of the sale and the date on which the redemption payment is made and 10 percent for each year or fraction of a year thereafter. If redemption is not made until more than 30 days after the notice provided for in Code Section 48-4-45 has been given, there shall be added to the redemption price the sheriff's cost in connection with serving the notice and the cost of publication of the notice, if any. All of the amounts required to be paid by this Code section shall be paid in lawful money of the United States to the purchaser at the tax sale or to the purchaser's successors.


O.C.G.A. § 48-4-43. Effect Of Redemption.

When property has been redeemed, the effect of the redemption shall be to put the title conveyed by the tax sale back into the defendant in fi. fa., subject to all liens existing at the time of the tax sale. If the redemption has been made by any creditor of the defendant or by any person having any interest in the property, the amount expended by the creditor or person interested shall constitute a first lien on the property and, if the quitclaim deed provided for in Code Section 48-4-44 is recorded as required by law, shall be repaid prior to any other claims upon the property.

O.C.G.A. § 48-4-44. Quitclaim Deed By Purchaser.

(a) In all cases where property is redeemed, the purchaser at the tax sale shall make a quitclaim deed to the defendant in fi. fa., which deed shall recite:
(1) The name of the person who has paid the redemption money; and
(2) The capacity in which or the claim of right or interest pursuant to which the redemption money was paid.
(b) The recitals required by subsection (a) of this Code section shall be prima-facie evidence of the facts stated.
(c) If the quitclaim deed provided for in subsection (a) of this Code section is presented to the purchaser at the time such person accepts the amount payable for the redemption in the form of cash or a certified check, the purchaser shall, at that time, sign the quitclaim deed if a notary public and an unofficial witness are present to witness such signature.
(d) If no quitclaim deed is presented at the time of the redemption or if sufficient witnesses are not present, it shall be the responsibility of the purchaser to prepare and properly execute such quitclaim deed as is required by law within seven days from the date of the redemption.
(e) It shall be the responsibility of the purchaser once the quitclaim deed is properly executed as required in subsection (d) of this Code section to present such deed for recordation to the clerk of the court within ten days of the redemption. The quitclaim deed shall be presented for recordation in the county where the tax sale originally occurred. The purchaser shall pay all recording costs and return the recorded quitclaim deed to the redeemer.
History. Amended by 2006 Ga. Laws 759, O.C.G.A. §6, eff. 7/1/2006.

O.C.G.A. § 48-4-45. Notice Of Foreclosure Of Right To Redeem; Time; Persons Entitled To Notice.

(a) After 12 months from the date of a tax sale, the purchaser at the sale or his heirs, successors, or assigns may terminate, foreclose, divest, and forever bar the right to redeem the property from the sale by causing a notice or notices of the foreclosure, as provided for in this article:
(1) To be served upon all of the following persons who reside in the county in which the property is located:
(A) The defendant in the execution under or by virtue of which the sale was held;
(B) The occupant, if any, of the property; and
(C) All persons having of record in the county in which the land is located any right, title, or interest in, or lien upon the property;
(2) To be sent by registered or certified mail or statutory overnight delivery to each of the persons specified in subparagraphs (A), (B), and (C) of paragraph (1) of this subsection who resides outside the county in which the property is located, if the address of that person is reasonably ascertainable; and
(3) To be published, if that tax sale occurs on or after July 1, 1989, in the newspaper in which the sheriff's advertisements for the county are published in each county in which that property is located, which publication shall occur once a week for four consecutive weeks in the six-month period immediately prior to the week of the redemption deadline date specified in the notice.
(b) Nothing contained in this Code section shall be construed to require that any notice be sent to or served upon any person whose right, title, interest in, or lien upon the property does not appear of record in the county in which the land is located.
(c) The heirs of any deceased owner of any land entitled to notice pursuant to this Code section shall be served by the sheriff or notified as provided in this article.

O.C.G.A. § 48-4-46. Form Of Notice Of Foreclosure Of Right To Redeem; Service; Time; Return And Record; Waiver.

(a) The notice provided for in Code Section 48-4-45 shall be written or printed, or written in part and printed in part, and shall be in substantially the following form:
Take notice that:
The right to redeem the following described property, to wit:
______ will expire and be forever foreclosed and barred on and
after the ______ day of ______________, ____.
The tax deed to which this notice relates is dated the ______ day
of ______________, ____, and is recorded in the office of the
Clerk of the Superior Court of ________ County, Georgia, in Deed
Book ____ at page ____.
The property may be redeemed at any time before the ______ day of
______________, ____, by payment of the redemption price as fixed
and provided by law to the undersigned at the following address:
___________________________________________________________________.
Please be governed accordingly.
_______________
(b) The purchaser at the tax sale or his heirs, successors, or assigns, as the case may be, shall make out an original notice in substantially the form prescribed in subsection (a) of this Code section and one copy of the notice for each person to be served with the notice. The purchaser shall deliver the notice and the copies together with a list of the persons to be served to the sheriff of the county in which the land is located not less than 45 days before the date set in each notice for the expiration of the right to redeem. Within 15 days after delivery to him, the sheriff shall serve a copy of the notice personally or by deputy upon each of the persons included on the list furnished him who reside in the county.
The sheriff shall make an entry of the service on the original copy of the notice. Leaving a copy of the notice at the residence of any person required to be served with the notice shall be a sufficient service of the notice.
(c) If the sheriff personally or by deputy makes an entry that he is unable for any reason to effect service upon any person required to be served, the person who requested that the service be made shall forthwith cause a copy of the notice to be published once a week for two consecutive weeks in the newspaper in which the sheriff's advertisements for the county are published, unless that notice is being published as provided in paragraph (3) of subsection (a) of Code Section 48-4-45. Either publication shall operate as and for all purposes shall be treated as service upon all persons as to whom the sheriff has made an entry that he has been unable to effect service.
(d) Each original notice together with the entry of the sheriff on the notice shall be returned to the person by whom the service was requested upon the payment of the sheriff's costs as provided by law. Any original notice together with the entries on the notice may be filed and recorded on the deed records in the office of the clerk of the superior court of the county in which the land is located.
(e) Service of notices as provided in this Code section may be waived in writing by any person required or entitled to be served with the notice.

O.C.G.A. § 48-4-47. Tender Of Redemption Price Before Action To Cancel Tax Deed.
(a) After notice to foreclose the right of redemption as provided for in this article has been given, no action shall be filed, allowed, sanctioned, or maintained for the purpose of setting aside, canceling, or in any way invalidating the tax deed referred to in the notice or the title conveyed by the tax deed unless and until the plaintiff in the action pays or legally tenders to the grantee in the deed or to his successors the full amount of the redemption price for the property, as provided for in this article.
(b) Subsection (a) of this Code section shall apply unless it clearly appears that:
(1) The tax or special assessment for the collection of which the execution under or by virtue of which the sale was held was not due at the time of the sale; or
(2) Service or notice was not given as required in this article.

O.C.G.A. § 48-4-48. Ripening Of Tax Deed Title By Prescription.
(a) A title under a tax deed properly executed at a valid and legal sale prior to July 1, 1989, shall ripen by prescription after a period of seven years from the date of execution of that deed.
(b) A title under a tax deed executed on or after July 1, 1989, but before July 1, 1996, shall ripen by prescription after a period of four years from the execution of that deed. A title under a tax deed properly executed on or after July 1, 1996, at a valid and legal sale shall ripen by prescription after a period of four years from the recordation of that deed in the land records in the county in which said land is located.
(c) A tax deed which has ripened by prescription pursuant to any provision of this Code section shall convey, when the defendant in fi. fa. is not laboring under any legal disability, a fee simple title to the property described in that deed, and that title shall vest absolutely in the grantee in the deed or in the grantee's heirs or assigns. In the event the defendant in fi. fa. is laboring under any legal disability, the prescriptive term specified in this Code section shall begin from the time the disabilities are removed or abated.
(d) Notice of foreclosure of the right to redeem property sold at a tax sale shall not be required to have been provided in order for the title to such property to have ripened under subsection (a) or (b) of this Code section.


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084


Phone: 404-633-4100
Fax: 404-633-0068

http://www.woodandmeredith.com/h
wood@woodandmeredith.com




Tuesday, July 28, 2009

Title Insurance Now Available For Tax Sales

Atlanta, GA. For years (really, years), I have posted this Question on our web site:

Question: Where can you get title insurance for Tax Sale Property?


Answer: No where in Georgia.

A curious thing is happening. In the sleepy past, title insurance companies (adverse to risk) refused to insure post tax sale properties. But that is changing.

Has the ugly ducking (unmarketable tax title) suddenly become a swan? (marketable).

In the go-go real estate days (before September 2008 and perhaps before January 1, 2008), title companies would occasionally make expectations for my presentations of a "perfect" title. It was not common.

However, this market is different.

Instead of thousands of delinquent properties and thousands of foreclosures (make that ten of thousands), there are now millions of tax delinquent properties and millions of foreclosures.

So what's happened with all the homes that have been previously foreclosed upon?

Apparently mortgage lenders are sitting on about 700,000 foreclosed homes that are not being offered for sale, according to Bloomberg. * * * Meanwhile, the blood-letting in the housing market is expected to continue. * * * Homeowners in California had the most foreclosure filings, followed by Florida and Arizona. About 8.3 million borrowers are underwater on their mortgages, owing more than the value of their home. If home prices drop another 5%, another 2.2 million homeowners will be underwater, according to data from First American CoreLogic.Number of Foreclosures Rose 30% in February (2009). Rebuild.org. March 12, 2009.

The numbers of foreclosures and unsold tax sale properties is staggering, in relation to a few years ago.

The volume alone means that the already crowded court dockets simply cannot process the volume of unmarketable post tax sale properties (the titles are unmarketable, because no title insurance is available for the title).

Capitalism, being what it is, has finally moved to fill the void and overcome the risk associated with tax sale properties.

While the particulars still seem a bit murky (even to one who has been doing this for awhile), a number of very large title companies are quietly writing title policies. The polices are time consuming, require significant documentation and are substantially more expensive than an ordinary title policy issued at closing, but - for the first time - they do exit.

The emergence of this alternative to a lengthy and time consuming quiet title action (“QTA”) can only be a benefit to investors who are bogged down with valuable, but unmarketable, tax properties.

If you have a tax property (Georgia or elsewhere) that you would like to insure, email or call us. Perhaps the time has finally arrived to insure these previously uninsurable properties.

Hugh C. Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Tucker, GA 30084

Phone: 404.633.4100
Fax: 404.633.0068
email: hwood@woodandmeredith.com
Web: www.woodandmeredith.com

Image (c) Title Ins. Panama

Monday, May 18, 2009

The FDCPA :: Just the Text

In the post "failed modification," "post foreclosure" world, I have never had so many questions posed at parties, private gatherings and baseball games about the Fair Debt Collection Practices Act ("FDCPA"). If an anecdotal sampling of questions is any test of the economy, then my guess is the economy is bad.

The questions that are almost as common as Fair Debt Collection Practices Act questions concern the workings of the "means test" in Chapter 7 vis-a-vis Chapter 13 after October 17, 2005 revisons to the Bankruptcy Act. Maybe I will post those next.

Here, by virtue of the number of times I have been asked and emailed questions about same is the (relevant part of) the FDCPA.

Hugh Wood
Atlanta, GA

& & &



The Fair Debt Collection Practices Act
TITLE 15. Commerce and Trade
CHAPTER 41. Consumer Credit Protection
15 USCS prec § 1692
§ 1692. Congressional findings and declaration of purpose
(a) Abusive practices. There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

(b) Inadequacy of laws. ESxisting laws and procedures for redressing these injuries are inadequate to protect consumers.

(c) Available non-abusive collection methods. Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.

(d) Interstate commerce. Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.

(e) Purposes. It is the purpose of this title [15 USCS § § 1692 et seq.] to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.
15 USCS § 1692a
§ 1692a. Definitions
As used in this title [15 USCS § § 1692 et seq.]--
(1) The term "Commission" means the Federal Trade Commission.
(2) The term "communication" means the conveying of information regarding a debt directly or indirectly to any person through any medium.
(3) The term "consumer" means any natural person obligated or allegedly obligated to pay any debt.
(4) The term "creditor" means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term "debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
(6) The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6) [15 USCS § 1692f(6)], such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include--
(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
(7) The term "location information" means a consumer's place of abode and his telephone number at such place, or his place of employment.
(8) The term "State" means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.
15 USCS § 1692b
§ 1692b. Acquisition of location information
Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall--
(1) identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer;
(2) not state that such consumer owes any debt;
(3) not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information;
(4) not communicate by post card;
(5) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt; and
(6) after the debt collector knows the consumer is represented by an attorney with regard to the subject debt and has knowledge of, or can readily ascertain, such attorney's name and address, not communicate with any person other than that attorney, unless the attorney fails to respond within a reasonable period of time to communication from the debt collector.
15 USCS § 1692c
§ 1692c. Communication in connection with debt collection
(a) Communication with the consumer generally. Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt--
(1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o'clock antimeridian and before 9 o'clock postmeridian, local time at the consumer's location;
(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or
(3) at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.
(b) Communication with third parties. Except as provided in section 804 [15 USCS § 1692b], without the prior consent of the consumer given directly to the debt collector, or the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a postjudgment judicial remedy, a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

(c) Ceasing communication. If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except--
(1) to advise the consumer that the debt collector's further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor; or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy. If such notice from the consumer is made by mail, notification shall be complete upon receipt.
(d) "Consumer" defined. For the purpose of this section, the term "consumer" includes the consumer's spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
15 USCS § 1692d
§ 1692d. Harassment or abuse
A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.
(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
(3) The publication of a list of consumers who allegedly refuse to pay debts, except to a consumer reporting agency or to persons meeting the requirements of section 603(f) or 604(3) of this Act [15 USCS § § 1681a(f) or 1681b(3)].
(4) The advertisement for sale of any debt to coerce payment of the debt.
(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.
(6) Except as provided in section 804 [15 USCS § 1692b], the placement of telephone calls without meaningful disclosure of the caller's identity.
15 USCS § 1692e
§ 1692e. False or misleading representations
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
(2) The false representation of--
(A) the character, amount, or legal status of any debt; or
(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.
(4) The representation or implication that nonpayment of any debt will result in the arrest or imprisonment of any person or the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action.
(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.
(6) The false representation or implication that a sale, referral, or other transfer of any interest in a debt shall cause the consumer to--
(A) lose any claim or defense to payment of the debt; or
(B) become subject to any practice prohibited by this title [15 USCS § § 1692 et seq.].
(7) The false representation or implication that the consumer committed any crime or other conduct in order to disgrace the consumer.
(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.
(9) The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.
(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.
(12) The false representation or implication that accounts have been turned over to innocent purchasers for value.
(13) The false representation or implication that documents are legal process.
(14) The use of any business, company, or organization name other than the true name of the debt collector's business, company, or organization.
(15) The false representation or implication that documents are not legal process forms or do not require action by the consumer.
(16) The false representation or implication that a debt collector operates or is employed by a consumer reporting agency as defined by section 603(f) of this Act [15 USCS § 1681a(f)].
15 USCS § 1692f
§ 1692f. Unfair practices
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
(2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writing of the debt collector's intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.
(3) The solicitation by a debt collector of any postdated check or other postdated payment instrument for the purpose of threatening or instituting criminal prosecution.
(4) Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.
(5) Causing charges to be made to any person for communications by concealment of the true purpose of the communication. Such charges include, but are not limited to, collect telephone calls and telegram fees.
(6) Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if--
(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.
(7) Communicating with a consumer regarding a debt by post card.
(8) Using any language or symbol, other than the debt collector's address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.
15 USCS § 1692g
§ 1692g. Validation of debts
(a) Notice of debt; contents. Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing--
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts. If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

(c) Admission of liability. The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
15 USCS § 1692h
§ 1692h. Multiple debts
If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer's directions.
15 USCS § 1692i
§ 1692i. Legal actions by debt collectors
(a) Venue. Any debt collector who brings any legal action on a debt against any consumer shall--
(1) in the case of an action to enforce an interest in real property securing the consumer's obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or
(2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity--
(A) in which such consumer signed the contract sued upon; or
(B) in which such consumer resides at the commencement of the action.
(b) Authorization of actions. Nothing in this title [15 USCS §§ 1692 et seq.] shall be construed to authorize the bringing of legal actions by debt collectors.
15 USCS § 1692j
§ 1692j. Furnishing certain deceptive forms
(a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.

(b) Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 813 [15 USCS § 1692k] for failure to comply with a provision of this title [15 USCS § § 1692 et seq.].
15 USCS § 1692k
§ 1692k. Civil liability
(a) Amount of damages. Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title [15 USCS § § 1692 et seq.] with respect to any person is liable to such person in an amount equal to the sum of--
(1) any actual damage sustained by such person as a result of such failure;
(2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $ 1,000; or
(B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $ 500,000 or 1 per centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney's fees reasonable in relation to the work expended and costs.
(b) Factors considered by court. In determining the amount of liability in any action under subsection (a), the court shall consider, among other relevant factors--
(1) in any individual action under subsection (a)(2)(A), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B), the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional.
(c) Intent. A debt collector may not be held liable in any action brought under this title [15 USCS § § 1692 et seq.] if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

(d) Jurisdiction. An action to enforce any liability created by this title [15 USCS § § 1692 et seq.] may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.

(e) Advisory opinions of Commission. No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
15 USCS § 1692l
§ 1692l. Administrative enforcement
(a) Federal Trade Commission. Compliance with this title [15 USCS § § 1692 et seq.] shall be enforced by the Commission, except to the extent that enforcement of the requirements imposed under this title [15 USCS § § 1692 et seq.] is specifically committed to another agency under subsection (b). For purpose of the exercise by the Commission of its functions and powers under the Federal Trade Commission Act [15 USCS § § 41 et seq.], a violation of this title [15 USCS § § 1692 et seq.] shall be deemed an unfair or deceptive act or practice in violation of that Act [15 USCS § § 41 et seq.]. All of the functions and powers of the Commission under the Federal Trade Commission Act [15 USCS § § 41 et seq.] are available to the Commission to enforce compliance by any person with this title [15 USCS § § 1692 et seq.], irrespective of whether that person is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act [15 USCS § § 41 et seq.], including the power to enforce the provisions of this title [15 USCS § § 1692 et seq.] in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.

(b) Applicable provisions of law. Compliance with any requirements imposed under this title [15 USCS § § 1692 et seq.] shall be enforced under--
(1) section 8 of the Federal Deposit Insurance Act [12 USCS § 1818], in the case of--
(A) national banks, and Federal branches and Federal agencies of foreign banks, by the Office of the Comptroller of the Currency;
(B) member banks of the Federal Reserve System (other than national banks), branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured State branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25(a) [25A] of the Federal Reserve Act [12 USCS § § 601 et seq. or § § 611 et seq.], by the Board of Governors of the Federal Reserve System; and
(C) banks insured by the Federal Deposit Insurance Corporation (other than members of the Federal Reserve System) and insured State branches of foreign banks, by the Board of Directors of the Federal Deposit Insurance Corporation;
(2) section 8 of the Federal Deposit Insurance Act [12 USCS § 1818], by the Director of the Office of Thrift Supervision, in the case of a savings association the deposits of which are insured by the Federal Deposit Insurance Corporation;
(3) the Federal Credit Union Act [12 USCS § § 1751 et seq.], by the Administrator of the National Credit Union Administration [National Credit Union Administration Board] with respect to any Federal credit union;
(4) the Acts to regulate commerce [49 USCS § § 10101 et seq.], by the Secretary of Transportation, with respect to all carriers subject to the jurisdiction of the Surface Transportation Board;
(5) the Federal Aviation Act of 1958 [49 USCS § § 40101 et seq.], by the Secretary of Transportation with respect to any air carrier or any foreign air carrier subject to that Act [49 USCS § § 40101 et seq.]; and
(6) the Packers and Stockyards Act, 1921 [7 USCS § § 181 et seq.] (except as provided in section 406 of that Act [7 USCS § § 226 and 227]), by the Secretary of Agriculture with respect to any activities subject to that Act [7 USCS § § 181 et seq.].
The terms used in paragraph (1) that are not defined in this title [15 USCS § § 1692 et seq.] or otherwise defined in section 3(s) of the Federal Deposit Insurance Act (12 U.S.C. 1813(s)) shall have the meaning given to them in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101).

(c) Agency powers. For the purpose of the exercise by any agency referred to in subsection (b) of its powers under any Act referred to in that subsection, a violation of any requirement imposed under this title [15 USCS § § 1692 et seq.] shall be deemed to be a violation of a requirement imposed under that Act. In addition to its powers under any provision of law specifically referred to in subsection (b), each of the agencies referred to in that subsection may exercise, for the purpose of enforcing compliance with any requirement imposed under this title [15 USCS § § 1692 et seq.] any other authority conferred on it by law, except as provided in subsection (d).

(d) Rules and regulations. Neither the Commission nor any other agency referred to in subsection (b) may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this title [15 USCS § § 1692 et seq.].
15 USCS § 1692m
§ 1692m. Reports to Congress by the Commission; views of other Federal agencies
(a) Not later than one year after the effective date of this title and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this title [15 USCS § § 1692 et seq.], including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this title [15 USCS § § 1692 et seq.] is being achieved and a summary of the enforcement actions taken by the Commission under section 814 of this title [15 USCS § 1692l]

(b) In the exercise of its functions under this title [15 USCS § § 1692 et seq.], the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 814 of this title [15 USCS § 1692l].
15 USCS § 1692n
§ 1692n. Relation to State laws
This title [15 USCS § § 1692 et seq.] does not annul, alter, or affect, or exempt any person subject to the provisions of this title [15 USCS § § 1692 et seq.] from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this title [15 USCS § § 1692 et seq.], and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this title [15 USCS § § 1692 et seq.] if the protection such law affords any consumer is greater than the protection provided by this title [15 USCS § § 1692 et seq.].
15 USCS § 1692o
§ 1692o. Exemption for State regulation
The Commission shall by regulation exempt from the requirements of this title [15 USCS § § 1692 et seq.] any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this title [15 USCS § § 1692 et seq.], and that there is adequate provision for enforcement.


Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068

Wednesday, May 6, 2009

Have A Dispute With Your Lawyer? Send it to Fee Arbitration

Georgia is one of a majority of States that demands its attorneys submit to State Bar sponsored Fee Arbitration. If the attorney and client cannot agree on the amount of the fee to be paid the lawyer, the client may petition for fee arbitration.

Generally, the public does not know and is not aware that Georgia lawyers must submit, initially, to a demand made against them pursuant to State Bar sponsored fee arbitration.

This does not mean that a dissatisfied client may taken his or her attorney to task for no reason, nor does it set aside a valid contract entered into between the attorney and client. It does, however, provide an out of court solution to many common fee disputes.

The rules are stated below. The client must file within two (2) years of the date the dispute began, the client and lawyer cannot be (at the time of filing) in court litigating the same fee and the client must agree to be bound be the result rendered at the State Bar.

An unknown novel outcome to fee arbitration is: If the client wins at fee arbitration and the lawyer refuses to pay, the State Bar of Georgia will (after the award is entered) provide the client with a free lawyer to help defend and enforce the award against the losing lawyer.

Hugh Wood
Atlanta, GA


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Georgia State Bar Rule 6-201. Jurisdiction.
The Committee may accept jurisdiction over a fee dispute only if all of the following requirements are satisfied:
(a) The fee in question, whether paid or unpaid, has been charged for legal services rendered by a lawyer who is or who at the time of rendition of the service had been licensed to practice law in the State of Georgia or who been duly licensed as a foreign legal consultant in the State of Georgia.
(b) The services in question were performed either in the State of Georgia or from an office located in the State of Georgia.
(c) At the time the legal services in question were performed there existed between the lawyer and the client an expressed or implied contract establishing between them a lawyer/client relationship. A relative or other person paying the legal fees of the client may request arbitration of disputes over those fees provided both the client and the payor join as co-petitioners or co-respondents and both agree to be bound by the result of the arbitration.
(d) The disputed fee:
(1) exceeds ($750) seven hundred and fifty dollars.
(2) is not one the amount of which is governed by statute or other law, nor one the full amount or all terms of which have already been fixed or approved by order of a court.
(e) A petition seeking arbitration of the dispute is filed with the Committee by the lawyer or the client no more than two (2) years following the date on which the controversy arose. If this date is disputed, it shall be determined in the same manner as the commencement of a cause of action on the underlying contract.
(f) The client, whether petitioner or respondent, agrees to be bound by the result of the arbitration.
(g) The fee dispute is not the subject of litigation in court at the time the petition for arbitration is filed.
(h) The petition contains the following elements:
(1) A statement of the nature of the dispute and the particulars of the petitioner's position, including relevant dates.
(2) The identities of both the client and the lawyer and the addresses of both.
(3) A statement that the petitioner has made a good faith effort to resolve the dispute and the details of that effort.
(4) The agreement of the petitioner to be bound by the result of the arbitration.
(5) The signature of the petitioner and date of the petition.
(6) The petition shall be filed on a form which will be supplied by the Committee. Such petition shall be served upon the opposite party at such party's last known address by certified mail, return receipt requested.
(i) In case of disputes between lawyers, the lawyers who are parties to the dispute are all members of the State Bar of Georgia, and all the lawyers involved agree to the arbitration.


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The purpose of this program is to provide a convenient mechanism for (1) the resolution of disputes between lawyers and clients over fees, (2) the resolution of disputes between lawyers in connection with the withdrawal of a lawyer from a partnership or the dissolution and separation of a partnership, or (3) the resolution of disputes between lawyers concerning the entitlement to portions of fees earned from joint services. It is a process which may be invoked by either side after the parties have been unable to reach an agreement between themselves. Regardless of whether it is the lawyer or the client who takes the initiative of filing a petition requesting arbitration of the disputes, the petitioner must agree to be bound by the result of the arbitration. This is intended to discourage the filing of complaints which are frivolous or which seek to invoke the process simply to obtain an "advisory opinion". If the respondent also agrees to be bound, the resulting arbitration award will be enforceable under the general arbitration laws of the State.
A unique feature of this program provides that where the petitioner is a client whose claim after investigation appears to warrant a hearing, and the respondent lawyer refuses to be bound by any resulting award, the matter will not be dismissed, but an ex parte arbitration hearing may be held. If the outcome of this hearing is in the client's favor, the State Bar will provide a lawyer at no cost, other than actual litigation expenses, to the client to represent the client in subsequent litigation to adjust the fee in accordance with the arbitration award.
CHAPTER 1 COMMITTEE ON RESOLUTION OF FEE DISPUTES
Rule 6-101. Committee
Rule 6-102. Membership
Rule 6-103. Terms
Rule 6-104. Responsibility
Rule 6-105. Staff
Rule 6-106. Waiting Period
CHAPTER 2 JURISDICTIONAL GUIDELINES
Rule 6-201. Jurisdiction
Rule 6-202. Termination or Suspension of Proceedings
Rule 6-203. Revocation
CHAPTER 3 SELECTION OF ARBITRATORS
Rule 6-301. Roster of Arbitrators
Rule 6-302. Neutrality of Arbitrators
Rule 6-303. Selection of Arbitrators
Rule 6-304. Qualifications
Rule 6-305. Compensation
CHAPTER 4 RULES OF PROCEDURE
Rule 6-401. Time and Place of Hearing
Rule 6-402. Attendance at Hearing
Rule 6-403. Counsel
Rule 6-404. Stenographic Record
Rule 6-405. Death, Disability, or Resignation of Arbitrator
Rule 6-406. Discovery and Witnesses
Rule 6-407. Adjournments
Rule 6-408. Oaths
Rule 6-409. Order of Proceedings
Rule 6-410. Arbitration in the Absence of a Party
Rule 6-411. Evidence
Rule 6-412. Written Contract
Rule 6-413. Closing of Hearings
Rule 6-414. Reopening of Hearings
Rule 6-415. Waiver of Rules
Rule 6-416. Waiver of Oral Hearings
Rule 6-417. Award
Rule 6-418. Time of Award
Rule 6-419. Form of Award
Rule 6-420. Award Upon Settlement
Rule 6-421. Delivery of Award to Parties
Rule 6-422. Communication with Arbitrators
Rule 6-423. Interpretation and Application of Rules
CHAPTER 5 POST DECISION ACTIVITY
Rule 6-501. Where Both Parties Agree
Rule 6-502. Where Lawyer Refuses to be Boun
CHAPTER 6 SPECIAL PROCEDURES
Rule 6-601. Special Case Procedure
CHAPTER 7 CONFIDENTIALITY
Rule 6-701. Confidentiality

END



Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084

www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
twitter: USALawyer_
Phone: 404-633-4100

Fax: 404-633-0068

Saturday, May 2, 2009

Personal Liability Looms as Condo Market Continues to Implode

The continuing implosion of the condominium market is not only pushing the unpaid condominium first security deeds [first mortgages] back on the lender, it is leaving an ugly trail of personal liability of unpaid condo assessments following the defaulted unit owners. To add insult to injury, the Georgia Court of Appeals recently ruled that if the condominium association is forced to resort to suit to collect its condo fees an award of reasonable attorneys fees against the unit owner is virtually mandatory.

One lender recently reported to the Wall Street Journal at as of the end of 2008, "only 66 Atlanta units were sold in the second half of 2008, and just 645 were sold in all of last year (2008). That is down from 1,704 units sold in 2007 and a peak of 4,747 condos sold in 2005." Jonathan Karp, In Condo Terms, Atlanta Is the New Miami, Wall Street Journal, Jan 29, 2009. Of the 3,800 condo units that lender has for sale only 1,836 have been sold. Id.

A little watched statute change in the 2004 General Assembly granted condominium associations broad powers to sue the unit owners for unpaid condominium fees. OCGA § 44-3-109.[1] Prior to the 2004 change, it was cumbersome and expensive for condominium associations to sue the unit owners, obtain liens on the units and then foreclose against the units.

The 2004 statute provides a summary type action whereby the association simply affirmatively pleads the existence of the Condominium Declaration, the fact that owner "Y," owns unit "Z," and that owner "Y," is many thousands of dollars behind on condominium assessments due the association.

While the statute speaks for itself and the unit owner may interpose defenses, those defenses are limited to issues surrounding the debt and the legality of the Declaration, and the imposition of correct assessments. If the assessments are not paid, the Association goes to judgment against the unit Owner. The condominium association takes its judgment "subject to," the first security deed, which differs from the prior law. The condominium association is no longer required to conform the First leinholder about priority and possible acceptation and payoff of the first security deed.

While subordinate to county taxes and the first security deed, the condominium association nevertheless has a judgment. That judgment, unfortunately for the unit owner, becomes the "the personal obligation of the unit owner." OCGA § 44-3-109(a).

Not only is it painful in this economy that the unpaid judgment follows the owner as a "personal judgment," the Georgia Court of Appeals has indicated that the trial courts must award reasonable attorneys fees to the Associations if it is forced to collect its fees by suit. The Springs Condominium Association, Inc. v. Harris, Appeal Case No., A09A0297, Court of Appeals of Georgia, Second Division (April 16, 2009).[2]

Because the case is governed by OCGA § 44-3-109(b)(3), which mandates an award of attorney fees when an association is forced to file a statutory lien for condominium assessments and the association's condominium's documents provide for the payment of these fees, we reverse the trial court's order and remand this case for the trial court to determine the reasonableness of the Association's attorney fees. Id.

The old days of sleepy condominium associations are over. The battle for unpaid fees in this economy has now begun. [3] Armed with new state of the art collection weapons, expect to see more filings by condominium associations, until this real estate recession (depression) subsides.

Hugh Wood
Atlanta, GA



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[1]

OCGA § 44-3-109. Lien For Assessments; Personal Obligation Of unit Owner; Notice And Foreclosure; Lapse; Right To Statement Of Assessments; Effect Of Failure To Furnish Statement.
(a) All sums lawfully assessed by the association against any unit owner or condominium unit, whether for the share of the common expenses pertaining to that condominium unit, for fines, or otherwise, and all reasonable charges made to any unit owner or condominium unit for materials furnished or services rendered by the association at the owner's request to or on behalf of the unit owner or condominium unit, shall, from the time the same become due and payable, be the personal obligation of the unit owner and constitute a lien in favor of the association on the condominium unit prior and superior to all other liens whatsoever except:
(1) Liens for ad valorem taxes on the condominium unit;
(2) The lien of any first priority mortgage covering the unit and the lien of any mortgage recorded prior to the recording of the declaration;
(3) The lessor's lien provided for in Code Section 44-3-86; and
(4) The lien of any secondary purchase money mortgage covering the unit, provided that neither the grantee nor any successor grantee on the mortgage is the seller of the unit.
The recording of the declaration pursuant to this article shall constitute record notice of the existence of the lien, and no further recordation of any claim of lien for assessments shall be required.
(b) To the extent that the condominium instruments provide, the personal obligation of the unit owner and the lien for assessments shall also include:
(1) A late or delinquency charge not in excess of the greater of $10.00 or 10 percent of the amount of each assessment or installment thereof not paid when due;
(2) At a rate not in excess of 10 percent per annum, interest on each assessment or installment thereof and any delinquency or late charge pertaining thereto from the date the same was first due and payable;
(3) The costs of collection, including court costs, the expenses of sale, any expenses required for the protection and preservation of the unit, and reasonable attorney's fees actually incurred; and
(4) The fair rental value of the condominium unit from the time of the institution of an action until the sale of the condominium at foreclosure or until the judgment rendered in the action is otherwise satisfied.
(c) Not less than 30 days after notice is sent by certified mail or statutory overnight delivery, return receipt requested, to the unit owner both at the address of the unit and at any other address or addresses which the unit owner may have designated to the association in writing, the lien may be foreclosed by the association by an action, judgment, and foreclosure in the same manner as other liens for the improvement of real property, subject to superior liens or encumbrances, but any such court order for judicial foreclosure shall not affect the rights of holders of superior liens or encumbrances to exercise any rights or powers afforded to them under their security instruments. The notice provided for in this subsection shall specify the amount of the assessments then due and payable together with authorized late charges and the rate of interest accruing thereon. Unless prohibited by the condominium instruments, the association shall have the power to bid on the unit at any foreclosure sale and to acquire, hold, lease, encumber, and convey the same. The lien for assessments shall lapse and be of no further effect, as to assessments or installments thereof, together with late charges and interest applicable thereto, four years after the assessment or installment first became due and payable.
(d) Any unit owner, mortgagee of a unit, person having executed a contract for the purchase of a condominium unit, or lender considering the loan of funds to be secured by a condominium unit shall be entitled upon request to a statement from the association or its management agent setting forth the amount of assessments past due and unpaid together with late charges and interest applicable thereto against that condominium unit. Such request shall be in writing, shall be delivered to the registered office of the association, and shall state an address to which the statement is to be directed. Failure on the part of the association to mail or otherwise furnish such statement regarding amounts due and payable at the expiration of such five-day period with respect to the condominium unit involved to such address as may be specified in the written request therefore within five business days from the receipt of such request shall cause the lien for assessments created by this Code section to be extinguished and of no further force or effect as to the title or interest acquired by the purchaser or lender, if any, as the case may be, and their respective successors and assigns, in the transaction contemplated in connection with such request. The information specified in such statement shall be binding upon the association and upon every unit owner. Payment of a fee not exceeding $10.00 may be required as a prerequisite to the issuance of such a statement if the condominium instruments so provided.
(e) Nothing in this Code section shall be construed to prohibit actions maintainable pursuant to Code Section 44-3-76 to recover sums for which subsection (a) of this Code section creates a lien.
History. Amended by 2004 Ga. Laws 535, § 7, eff. 7/1/2004.

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[2]

THE SPRINGS CONDOMINIUM ASSOCIATION, INC.
v.
HARRIS.
A09A0297
Court of Appeals of Georgia, Second Division
April 16, 2009
JOHNSON, P. J., ELLINGTON and MIKELL, JJ.
Johnson, Presiding Judge.
The Springs condominium association, Inc. (the "Association") appeals the trial court's refusal to grant it an award of attorney fees in this case. Because the case is governed by OCGA § 44-3-109 (b) (3), which mandates an award of attorney fees when an association is forced to file a statutory lien for condominium assessments and the association's condominium's documents provide for the payment of these fees, we reverse the trial court's order and remand this case for the trial court to determine the reasonableness of the Association's attorney fees.
The facts of this case are not in dispute. The Association is an incorporated condominium association duly authorized to levy and collect assessments at The Springs Condominium. Cedric Harris is the owner of a condominium unit located at The Springs Condominium, and he is required to pay assessments to the Association pursuant to its declaration and OCGA § 44-3-70 et seq. The declaration and OCGA § 44-3-70 et seq. also authorize the collection of late charges, interest (at the rate of 10% per annum), reasonable attorney fees actually incurred, and costs and expenses related to the collection of these assessments. It is undisputed that Harris did not pay any required assessments, charges, late fees or interest, and the Association placed a lien on his condominium.
On November 8, 2007, the Association, through its attorney, sent Harris the statutory notice of intent to foreclose on its condominium lien. Harris did not respond, and on February 8, 2008, the Association sued Harris, seeking to recover a statutory lien in the amount of $15,522.90, reasonable attorney fees, costs and expenses. It also requested an order for judicial foreclosure of the statutory lien. On March 10, 2008, Harris answered and paid $15,522.90. However, this amount did not include attorney fees incurred after December 12, 2007, when the complaint was initially drafted. The trial court entered a final order on June 17, 2008, finding that Harris had paid the full amount of the statutory lien and declining to grant the Association an award of attorney fees. We agree with the Association's contention that the trial court was mandated by law to grant an award of attorney fees in this matter.
OCGA § 44-3-109 (b) (3) states as follows: "To the extent that the condominium instruments provide, the personal obligation of the unit owner and the lien for assessments shall also include... [t]he costs of collection, including court costs,... and reasonable attorney's fees actually incurred." Since the undisputed evidence in this case shows that The Springs Condominium declaration provides that a delinquent unit owner shall be liable for reasonable attorney fees actually incurred, an award of attorney fees was mandated under the statute. Where a statute's language as to an award of attorney fees is mandatory, the trial court is required to award attorney fees. [1] The trial court, therefore, erred in refusing to enter an award for attorney fees actually incurred subsequent to December 12, 2007. [2] We reverse the trial court's order and remand this case for the trial court to determine the reasonableness of the Association's attorney fees.
Judgment reversed.
Ellington and Mikell, JJ., concur.
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Notes:
[1] See Preece v. Turman Realty Co., 228 Ga.App. 609, 610 (492 S.E.2d 342) (1997).
[2] See Casey v. North Decatur Courtyards Condominium Assoc., 213 Ga.App. 190, 192 (3) (444 S.E.2d 361) (1994).
[Many thanks to my good friend Ned Blumenthal, Esq., for his helpful emails in this curious area of the law]



Hugh Wood, Esq.
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