In most residential and commercial leases in New York, there is an Attorneys’ Fees Clause included. A question that is often asked is, “Is that lease provision enforceable?”
New York follows the American Rule, which generally requires: (1) an agreement between the parties; (2) that the party seeking the legal fees be the prevailing party; and (3) whether those fees are reasonable. Whether the fees are reasonable is usually determined at a legal fee hearing by the court.
Whether a party is a prevailing party is often the subject of substantial litigation. Likewise, whether fees are reasonable often requires a legal fee hearing. However, the first prong, whether there is an agreement between the parties, is generally just a matter of whether there is a legal fees clause in the lease.
Most of the time, when that legal fees clause exists in a lease, it provides for fees for the landlord if the landlord is the prevailing party. However, both landlords and tenants should be aware that in residential cases in New York, Real Property Law, §234 provides a reciprocal right. RPL §234 sets forth:
“Wherever a lease of a residential property shall provide that in any action or summary proceeding, the landlord may recover attorneys’ fees and/or expenses incurred as a result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord, therefore, shall be paid by the tenant as additional rent, there shall be implied in such a lease a covenant by the landlord to pay the tenant the reasonable attorneys’ fees and/or expenses incurred by the tenants as a result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the beliefs or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease.“
In sum, this means the right to legal fees for a breach of the lease in New York, in residential cases, is reciprocal even if the language in the lease does not include a right to the tenant if the tenant is a prevailing party.
In addition to the application of the American Rule where there is a contract that provides for legal fees, there are some instances where a statutory right exists, whether or not a lease provides for legal fees. Real Property Law 227-D and Real Property Law 237-E award legal fees to victims of discrimination in housing. Real Property 226-B awards legal fees to a tenant if the landlord unreasonably withholds consent to a sublet request.
Parties involved in litigation or potential litigation in a landlord-tenant dispute should be aware of the threat of an entry or a money judgment for legal fees before they decide how they want to proceed in that litigation.
Jordi Fernandez Law, P.C.
420 Lexington Avenue, Suite 2920
New York, NY 10170