Signed a Surplus Funds Recovery Contract? Here’s What You Should Know in North Carolina
Signed a Surplus Funds Recovery Contract? Here’s What You Should Know in North Carolina
If your property was foreclosed and someone contacted you offering to “help recover your surplus funds” for a percentage, you may have legal options to cancel or challenge that agreement — especially if it was not with an attorney.
This post explains how North Carolina law treats these contracts and what that could mean for you.
What Is a Surplus Recovery Agreement?
This is typically a contract where a company says:
“We will help you recover your foreclosure surplus money, and you agree to pay us a fee or percentage of what we recover.”
North Carolina law regulates certain agreements whose main purpose is to help locate or recover money that is distributable to the owner. Surplus foreclosure funds fall into that category because they are money owed to the person entitled to receive them.
Many of These Contracts Must Meet Strict Requirements
If the statute applies, the agreement must meet specific legal requirements. It must:
Be in writing
Be signed and notarized by you
Be signed by a licensed private investigator authorized to bind the company
Clearly describe the property
Disclose the value before and after fees
Warn that other claims may reduce your share
Stay within statutory fee limits
Include required statutory disclosures
If these requirements are not met, the contract can be void and unenforceable.
“Void” means the company may not be able to legally enforce the agreement.
Many of These Contracts Must Meet Strict Requirements
If the statute applies, the agreement must meet specific legal requirements. It must:
Be in writing
Be signed and notarized by you
Be signed by a licensed private investigator authorized to bind the company
Clearly describe the property
Disclose the value before and after fees
Warn that other claims may reduce your share
Stay within statutory fee limits
Include required statutory disclosures
If these requirements are not met, the contract can be void and unenforceable.
“Void” means the company may not be able to legally enforce the agreement.
The Company Cannot Control Your Check
Even when an agreement is valid, a recovery company is not allowed to negotiate or deposit a check made payable to you.
If someone asks you to sign over your surplus check to them, that is a major red flag.
Violations Can Be Unfair Trade Practices
Failure to comply with the statute can make the agreement void and can also constitute an unfair or deceptive trade practice under North Carolina law. That can give consumers additional leverage.
What If the Money Is Still With the Clerk of Court?
After a foreclosure sale, surplus funds are usually deposited with the Clerk of Superior Court. There is legal debate about whether the statute applies before funds are transferred to the State Treasurer’s unclaimed property program.
However, the statute covers agreements aimed at recovering money that is distributable to the owner. That creates a strong argument that these recovery contracts may still be regulated — even while funds are held by the clerk.
Other Grounds to Challenge the Contract
Even if the specific statute does not apply, agreements can still be challenged based on:
Excessive or unconscionable fees
Misrepresentation
Lack of proper disclosure
Lack of consideration
Violations of North Carolina’s Unfair and Deceptive Trade Practices Act
The statute does not prevent other legal challenges.
If You Want Out of the Agreement
If you have already signed one of these contracts:
Do not endorse any check to the company.
Do not assume the agreement is automatically enforceable.
Gather your documents — including the contract, foreclosure file number, and any communications.
Act quickly. Timing matters.
It is much easier to challenge a contract before funds are distributed — but even if the money has already been paid out, you may still have options.
Courts can set aside void agreements. Payments made under unenforceable contracts can sometimes be recovered. And unfair trade practice claims may allow recovery of damages and attorney’s fees.
Do not assume that “it’s too late.”
Speak With an Attorney
Surplus recovery contracts are technical. Small details in the wording — or in how the company handled the process — can determine whether the agreement is enforceable.
An attorney can:
Evaluate whether the contract complies with North Carolina law
Determine whether statutory fee limits were violated
Assess whether the agreement is void
Review potential unfair trade practice claims
Seek recovery of funds if they were improperly taken
If you believe you signed an unfair surplus funds contract, or if a company has already taken a percentage of your surplus, have the agreement reviewed.
You may have more leverage than you think — even after the money has been disbursed.
The sooner you act, the more options you may preserve.