More Things To Worry About In Creating a Confession of Judgment Clause in a Commercial Lease.

Posted By Cliff Tuttle | September 13, 2015

No. 1,215

A confession of judgment clause of necessity creates a limited power of attorney empowering the landlord’s attorney to enter judgment in behalf of the tenant without a hearing.  Pennsylvania law regarding powers of attorney has been changing, with the most recent change occurring in new amendments effective on January 1, 2015.Act 95 of 2014 amended Title 20, Chapter 56 of the Pennsyllvania Consolidated Statutes, specifically §§5601 – 5612.

Christina Cogdon of Pepper Hamilton has published a blog post recommending a review of commercial leases containing confession of judgment provisions.

For starters, she recommends that, in order to comply with the statute,  the tenant should acknowledge his/her signature before a notary public. That was  a good idea even before the statute.  Just be sure that the notary is someone who can be easily found again and who is willing to go to court to testify.  Moreover, the notary should not be the attorney who is likely to be confessing judgment.

However, the article also suggests that the language of the confession be written to state that the agent will be acting for the best interest of the tenant because the landlord wouldn’t have granted the lease without a confession of judgment clause.

This a long stretch, but there appears to be little choice for the landlord.   As Cogdon points out, the duties of an agent under a power of attorney include the following duties:

• act loyally for the principal’s benefit;
• act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest;
• act with the care, competence and diligence ordinarily exercised by agents in similar circumstances;
• keep a record of all receipts, disbursements and transactions made on behalf of the principal.

So the landlord must sugarcoat a confession of judgment clause with recitals that the clause benefits the tenant, including that there is no conflict of interest between the tenant and the attorney-agent, who will then proceed to issue writs of possession and execution against the tenant. Such an arrangement cannot fail to create a conflict of interest, nor can it fail to impair” the agent’s ability to act impartially in the agent’s best interest.”

To make matters worse, at least some of these requirements cannot be waived.

No doubt, a court could hold that the legislature never intended to apply this statutory language to confessions of judgment.  If that is so, an actual amendment to the statute would be in order.

CLT

NOTE: The 1812 painting, “Sword of Damocles” by Richard Westall depicts the ever-present danger that attends being seated on the throne.  See the article in Wikopedia. A confession of judgment has been likened to the Sword of Damocles by some, since it can swiftly follow default.

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CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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