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Payment of Attorneys’ Fees by the Losing Party in a Landlord-Tenant Case

On Behalf of | Dec 30, 2011 | Rent Stabilization, Tenants' Rights |

The general rule in American courts (the so-called “American rule”) is that each party to a lawsuit bears his/her own legal expenses. Landlord-tenant litigation is sometimes an exception to that rule. Tenants who would like to know whether they may have to pay the landlord’s legal fees, or if the landlord may have to pay the tenant’s legal fees, will need to review the lease. In the case of a rent stabilized tenant, the lease the tenant must examine will be the original lease; this is because under rent stabilization, a lease is renewed on the same terms and conditions as the original lease. In the case of a market tenant, the tenant must examine the current lease, or if there is no current lease, the most recent lease. If there has never been any lease, then there is no right to attorneys’ fees for either the landlord or the tenant (but see the exceptions discussed below).

Many (if not most) leases have so-called attorneys’ fees provision. However, these clauses can be worded differently. A typical attorneys’ fees provision in a lease will state that the landlord may recover attorneys’ fees incurred as the result of the failure of the tenant to perform any covenant or agreement contained in the lease, or that legal fees paid by the landlord shall be paid by the tenant as additional rent. The Courts may enforce these provisions by ordering the tenant to pay the landlord’s legal fees, especially in a case where the tenant has not asserted any valid defense, or where the Court has fully reviewed the evidence and decided against the tenant. A rent stabilized tenant may be ordered to pay the landlord’s legal fees; however, the fees can’t be collected as “additional rent” no matter what the lease says; the landlord may only recover fees from a stabilized tenant as a monetary judgment.

Some leases, especially older apartment leases, have differently-worded attorneys’ fees provisions, and the Courts are divided as to whether these provisions are enforceable. For example, a lease provision that states the landlord who incurs legal fees in “re-renting” the apartment may recover the fees, may or may not be enforceable, depending on the particular Court’s review of the entire lease, as well as that Court’s interpretation of the law.

Under New York Law, specifically Real Property Law Section 234, where a residential lease has an attorneys’ fees provision containing the language referred to above, there shall be implied in the lease a covenant by the landlord to pay attorneys’ fees to the tenant incurred by the failure of the landlord to perform any covenant under the lease, or in the successful defense of any lawsuit brought by the landlord against the tenant arising under the lease. This statutory provision is designed to “level the playing field” so that landlords will be deterred from commencing and pursuing litigation that they know to be without merit.

Typically, a tenant who believes he or she is entitled to an award of attorneys’ fees under the lease and the law must obtain a court ruling after the case has been completely litigated and resolved in the tenant’s favor. That is, the tenant must be the “prevailing party” to the litigation. A tenant is usually not considered the prevailing party if the lawsuit is settled by stipulation. Where the dispute is partially won by the tenant, and partially won by the landlord, the Court will decide if the tenant is the prevailing party.

Also, the Court will sometimes order the landlord to pay the tenant’s attorneys fees in other situations. For example, if a landlord brings a holdover proceeding alleging that the tenant is not a primary resident of the apartment, then spends several months conducting discovery before deciding not to take the case to trial, the Court may order the landlord to pay the tenant’s fees as a condition for dropping (“discontinuing”) the case. A landlord also can be ordered to pay the tenant’s fees if a valid sublet request is unreasonably rejected, or if the landlord is found to have willfully overcharged a rent stabilized tenant.

Finally, a Court may order the losing party in a landlord-tenant case to pay the winning party’s attorneys’ fees if the Court finds that the losing party or the losing party’s attorney engaged in “frivolous conduct,” which is defined as taking a position that is completely without merit in law, or is undertaken primarily to delay the lawsuit or to harass or maliciously injure someone, or if false factual statements are made.

Ronald S. Languedoc

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