Any document where you “confess judgment” can seem scary. We would like to help you understand what this remedy is. Also called a “Cognovit,” Confession of Judgment is a legal remedy allowing a Lender or Landlord to obtain an expedited court judgment, giving the Lender or Landlord a monetary judgment, possession of mortgaged premises, or both. Importantly, Confession of Judgment requires no notice or hearing and cuts down time in court from months to mere weeks.
Pennsylvania is one of very few states that permit this remedy. Because of a concern that Confession of Judgment goes against “due process,” Courts do not take this remedy lightly. Pennsylvania Courts have created certain formalities to be followed:
- You see this provision called out separately in a Mortgage or a Disclosure for Confession of Judgment with UPPER CASE BOLD FONT.
- This provision often says that you knowingly and willingly enter into it, and that you had the advice of counsel in doing so.
- Sometimes you see an affirmation that the loan is for a business purpose, either in the Confession of Judgment or in a separate document. This is because the Pennsylvania Supreme Court has prohibited Confession of Judgment in consumer transactions.
- Sometimes you see this requiring a separate signature or initial to acknowledge it. In effect, the Lender or Landlord wants to preclude the argument that the provision was “buried” in the contract.
In a relationship where the Lender or Landlord have more bargaining power, a Confession of Judgment will be expected. When negotiating this clause, it is typical that the negotiations occur around the edges. That is, most banks insist that commercial transactions involving property feature a Confession of Judgment, while those banks may still have flexibility for some aspects of the operation and mechanics of this remedy.
As an example of what can be negotiated, a Confession of Judgment typically provides for payment of attorneys fees to the bank. This can be capped to a percentage of the recovery.