Finch leased a room from Campus Habitat and asserted that Campus Habitat breached their lease, causing her to move out. Campus Habitat responded and counterclaimed, receiving judgment for damages and, pursuant to the lease, attorneys’ fees.
Finch appealed, arguing that pursuant ton N.C.G.S. § 6-21.2, Campus Habitat was required to provide five(5) days notice and opportunity to pay any outstanding balance, before seeking attorneys’ fees. The Court of Appeals disagreed, finding that since Finch had initiated the lawsuit. The Court of Appeals did find that the attorneys’ fees in excess of 15% of the outstanding balance owed was not authorized.
While Finch may have lost this case, this does raise a very interesting defense to creditors’ requests for attorneys’ fees. N.C.G.S. § 21-2.2 (5) provides:
The holder of an unsecured note or other writing(s) evidencing an unsecured debt, and/or the holder of a note and chattel mortgage or other security agreement and/or the holder of a conditional sale contract or any other such security agreement which evidences both a monetary obligation and a security interest in or a lease of specific goods, or his attorney at law, shall, after maturity of the obligation by default or otherwise, notify the maker, debtor, account debtor, endorser or party sought to be held on said obligation that the provisions relative to payment of attorneys' fees in addition to the "outstanding balance" shall be enforced and that such maker, debtor, account debtor, endorser or party sought to be held on said obligation has five days from the mailing of such notice to pay the "outstanding balance" without the attorneys' fees. If such party shall pay the "outstanding balance" in full before the expiration of such time, then the obligation to pay the attorneys' fees shall be void, and no court shall enforce such provisions.
The pertinent pared down portion of this is that the creditor "shall ... notify the ... debtor ... that the provisions ... [for] payment of attorneys’ fees ... shall be enforced and that such ... debtor ... has five days from the mailing of such notice to pay the "outstanding balance" without the attorneys’ fees."
This means that if a creditor (unsecured or secured) does not give five days warning and opportunity to cure prior to bringing a Motion for Relief, that creditor should not later be entitled to attorneys’ fees.
For a copy of the opinion, please see: