In the News || Legal News

RECOVERY OF ATTORNEYS’ FEES IN LANDLORD-TENANT DISPUTES

By: Alan D. Zuckerbrod

As a general rule in New York, a party to a litigation is not entitled to recover its attorneys’ fees unless the dispute involves a contract that provides for such recovery or an award of attorneys’ fees is authorized by statute. In the commercial landlord-tenant context, disputes concerning the right to recover attorneys’ fees are not uncommon, because many such leases contain an attorney fee provision. This article sets forth the circumstances in which such fees can be recovered as well as the procedures for doing so.

For a party to recover attorneys’ fees, there must be a contractual provision so providing. As an example, the Standard Form of Office Lease of The Real Estate Board of New York, Inc. provides as follows:

If Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed or performed under, or by virtue of any of the terms or provisions in any article of this lease…Owner may immediately, or at any time thereafter and without notice, perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing, or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorneys’ fees in instituting, prosecuting or defending any action or proceeding and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid, or obligations incurred, with interest and costs.

In this provision, only the Landlord-Owner would have a right to recover attorneys’ fees, not the tenant. However, in the residential landlord-tenant context, if a lease contains an attorney fee provision in favor of the landlord, a reciprocal right to recover attorneys’ fees is implied by law in favor of the tenant under Section 234 of the Real Property Law, even if not provided for in the lease.

Once a court finds that a contractual provision exists for the recovery of attorneys’ fees, it will then turn to the question of whether the moving party has been the “prevailing party” in the underlying proceeding. In evaluating whether a party has prevailed, the court will look to the “central relief sought” by the movant, followed by what was achieved in the litigation. For example, in a holdover proceeding, where the central relief requested is possession of the premises, the court will look to whether the landlord obtained possession in order to determine if it was the prevailing party. In a non-payment of rent proceeding, the court will look to the extent of the landlord’s recovery. In such a case, a landlord need not recover 100%, so long as it recovers a substantial portion of what it is seeking. Courts have ruled that when both parties succeed in part and fail in part, neither party should obtain legal fees.

New York law requires that any claim for attorneys’ fees in a lease dispute must be brought in the same action or proceeding in which the fees were allegedly incurred. This principle is predicated upon the common law prohibition against litigants splitting their causes of action and thereby engaging in additional litigation. Thus, in the context of a summary proceeding, a landlord may not bring a separate action for attorneys’ fees due under a lease after the conclusion of a summary holdover proceeding. Furthermore, a parties’ failure to expressly preserve its claim for attorneys’ fees upon the settlement and discontinuance of an action precludes that party from bringing a subsequent action to recover attorneys’ fees. From a practical point of view, therefore, a litigant seeking to reserve the right to recover attorneys’ fees after the discontinuation of an action should do so expressly in a written stipulation. The failure to preserve such rights will be a waiver.

If you have any questions about the foregoing article or any related issues, please feel free to contact Alan Zuckerbrod at 212-981-2314 or azuckerbrod@sillerwilk.com