Dec32025
Surplus Funds Q&A Series

Can I hire a lawyer on contingency to recover surplus funds, and how are fees paid? – North Carolina

Short Answer

In North Carolina, a former owner or other claimant can usually hire a lawyer on a contingency fee to recover surplus funds held by the clerk after a foreclosure or execution sale. The fee is typically a percentage of the amount recovered and is paid from the client’s share of the surplus at the end of the case, not up front. Court costs and filing fees are separate, and in a special proceeding the clerk or judge may also allow an additional attorney’s fee to be paid directly from the surplus fund itself.

Understanding the Problem

The question is whether, under North Carolina law, a person claiming surplus funds after a home has been sold at foreclosure or execution can hire a surplus-funds lawyer on a contingency basis, how that lawyer is paid, and what steps and timing are involved in having the clerk of superior court release the money. The focus is on one decision point: choosing between a contingency fee, a flat fee, or other billing, and understanding when the fee is taken and what court costs apply in a North Carolina surplus-funds proceeding.

Apply the Law

Under North Carolina law, surplus funds from a foreclosure or execution sale are paid into the clerk of superior court when the trustee, sheriff, or tax foreclosure commissioner cannot safely pay them directly to the right person. A former owner or other claimant then starts a special proceeding before the clerk to determine who is entitled to the surplus. North Carolina statutes also allow the court, in its discretion, to award a reasonable attorney’s fee to the party who prevails in the surplus proceeding, to be paid out of the fund. Those attorney-fee provisions do not prohibit private contingency-fee agreements between a client and the client’s own lawyer, so long as the fee arrangement complies with the Rules of Professional Conduct and any other applicable fee rules.

Key Requirements

  • Surplus funds on deposit with the clerk: There must be money left after the sale that is held by the clerk of superior court under the foreclosure, execution, or tax foreclosure statutes.
  • Special proceeding to determine ownership: A claimant must file a special proceeding before the clerk in the county where the sale occurred to ask for a determination of who is entitled to those funds.
  • Attorney’s fee authority and private fee contract: The court may, in its discretion, award a reasonable attorney’s fee out of the surplus to the prevailing party’s lawyer, and the client and lawyer may separately agree to a contingency, flat, or hourly fee that controls how the client’s share is charged.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The facts describe a North Carolina home that was sold, leaving surplus funds held by the clerk. That satisfies the first requirement: surplus funds on deposit. To obtain them, the claimant will typically need to file a special proceeding before the clerk in the county of sale, naming any known lienholders or competing claimants. Under the surplus statutes, the clerk or a judge may allow a reasonable attorney’s fee out of the fund for the prevailing claimant’s lawyer; separate from that, the client and the lawyer can agree that the lawyer’s overall compensation will be a contingency percentage of what is ultimately recovered and disbursed.

Process & Timing

  1. Who files: A person claiming the surplus funds (often the former owner) or that person’s attorney. Where: Office of the Clerk of Superior Court in the county where the sale occurred. What: A verified petition or special proceeding to determine ownership of surplus funds, referencing the underlying foreclosure, execution, or tax case number. When: As soon as practical after the sale has closed and the trustee, sheriff, or commissioner has deposited the surplus with the clerk; North Carolina law does not set a short, fixed deadline, but delays can create priority and notice complications.
  2. The clerk issues service or notice to all known interested parties (such as lienholders or co-owners), and they have an opportunity to file answers asserting claims. If no one disputes entitlement, the clerk can usually rule on the papers and enter an order of disbursement within a period that often ranges from several weeks to a few months, depending on the county’s workload.
  3. If someone files an answer raising factual disputes, the clerk transfers the case to the civil issue docket of Superior Court for trial. After the court decides who is entitled to the surplus, it will enter an order directing the clerk to disburse the funds, and may also award a reasonable attorney’s fee to the prevailing party’s lawyer, to be paid from the fund before the remainder is distributed.

Exceptions & Pitfalls

  • Competing lienholders or co-owners may reduce or eliminate the amount reaching the former homeowner, which affects the base amount against which a contingency fee is calculated.
  • If a claimant signs multiple fee agreements with different surplus-funds firms, fee disputes can arise and delay disbursement; using one clear written fee agreement helps avoid this.
  • Court-awarded attorney’s fees out of the fund are discretionary; a clerk or judge may reduce or deny a requested fee even if the client agreed to a higher contingency percentage, so the private fee agreement should explain how any court-awarded fee will be credited against the client’s obligation.
  • Service or notice mistakes—such as failing to name a junior lienholder or known heir—can lead to objections, transfers to Superior Court, or even a later challenge to the disbursement order.
  • Non-lawyer “recovery” companies cannot lawfully provide legal representation in North Carolina; unauthorized practice of law issues can put a claimant’s recovery at risk and may affect the enforceability of fee arrangements.

Conclusion

Under North Carolina law, a claimant to surplus funds from a foreclosure, execution, or tax sale can generally hire a lawyer on a contingency basis, with the fee paid as a percentage of the client’s recovery when the clerk releases the funds. The clerk’s special proceeding determines entitlement to the surplus, and the court may, in its discretion, award a reasonable additional attorney’s fee from the fund. The key next step is to file a surplus-funds petition with the appropriate clerk of superior court promptly so the court can order disbursement.

Talk to a Surplus Funds Attorney

If a North Carolina home has been sold and surplus funds are now sitting with the clerk of superior court, our firm has experienced attorneys who can explain contingency versus flat fees and guide the process to request disbursement. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for any specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If there is a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Surplus Funds Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.