The following is a familiar fact pattern for those involved in real estate. A borrower defaults under a mortgage and note. The lender commences a foreclosure action. Once a final judgment of foreclosure is entered, a writ of execution is issued, and the sheriff schedules a sale to sell the real property. Either before or the day of the foreclosure sale, or within the borrower’s time period to exercise its right of redemption of equity, the borrower files for bankruptcy under Chapter 7 or 11 in an attempt to obtain more time to sell the property. Ultimately, the real property is sold pursuant to a bankruptcy court sale process, usually pursuant to section 363 of the Bankruptcy Code. The sheriff then seeks a commission in connection with the bankruptcy court sale of the real property. Question: is the sheriff entitled to a commission?
Today, due to tight budgets and limited revenue sources, one can expect to see the sheriff (and other governmental entities) seeking to more actively exercise their alleged rights in bankruptcy in order to collect revenue. While the fact pattern described above is simple and occurs with some frequency, the sheriff’s entitlement to a commission, if any, is primarily based on the applicable state law where the foreclosure sale was pending. If the sheriff does not actually sell the real property, (i) in certain states, such as Georgia, North Dakota and Virginia, the sheriff would not be entitled to any commission; (ii) in certain states, such as Colorado and Idaho, applicable state law entitles a sheriff to a fixed commission; (iii) in some states, nothing; and (iv) in certain states, such as New Jersey, New York, Hawaii and West Virginia, the statute is ambiguous and courts are split as to the sheriff’s entitlement to a commission and, if so, how much.Click here to view the full article