It has long been the rule in New York that “attorneys’ fees are deemed incidental to litigation and may not be recovered unless supported by statute, court rule or written agreement of the parties.” Flemming v. Barnwall Nursing Home & Health Facilities, Inc., 15 NY3d 375, 379 (2010). A lease for residential property can constitute such a written agreement and residential leases often contain provisions permitting landlords to recover attorneys’ fees incurred with enforcing the terms of the lease, including commencing and prosecuting summary proceedings.
Recognizing the disparity of bargaining power that often exists between landlords and tenants, in 1966, Real Property Law §234 was enacted to level the playing field and permit tenants to recover legal fees from a landlord, if the lease contains a provision that the landlord may recover from tenant the legal fees incurred by the landlord in connection with an action or summary proceeding, but does not contain a reciprocal provision in favor of the tenant. RPL§234, in relevant part, provides:
Whenever a lease of residential property shall provide that in any action
or summary proceeding the landlord may recover attorneys’ fees and/or
expenses incurred as the 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 lease a covenant by the landlord to pay to the
tenant the reasonable attorneys’ fees and/or expenses incurred by the
tenant as the result of the failure of the landlord to perform any covenant
or agreement on its part to be performed under the lease or in the
successful defense of any action or summary proceeding commenced
by the landlord against the tenant arising out of the lease . . .
In <strong>Matter of Casamento v. Juarequi, _____ AD3d___, ____ N.Y.S.2d ____.</strong> 60453/07, NYLJ 1202514734594, at *1 (App. Div. 2nd, Decided September 13, 2011), the Second Department took the opportunity to “examine and reconcile an apparent conflict among the courts” in interpreting “a pre-printed form [lease] which is generally in use throughout New York.” In rendering its decision reversing the lower courts and awarding attorney’s fees to the tenant, the Court “stress[ed] that the outcome of every motion for an award of attorney’s fees pursuant to [RPL] section 234 must be based upon a review of the complete lease provision at issue, within the context of the lease, in order to discern its meaning and import before that lease provision may be properly analyzed under the statutory mandate regarding the implied covenant in favor of the tenant.”
As set forth by the Court in <strong>Matter of Casamento</strong>, in March 2007, the landlord served a Notice to Cure alleging that the tenant violated specified paragraphs of their lease by physically assaulting landlord and making alterations to the bathroom and kitchen without landlord’s prior written consent.
The Notice specified that “pursuant to your lease you are responsible for legal fees incurred by the landlord with regard to the preparation and service of this Notice to Cure and any and all work done prior to and subsequently thereto based upon your default under the lease.” Landlord subsequently served a Termination Notice and commenced a holdover proceeding. The tenant prevailed and subsequently moved for an award of attorney’s fees. The motion was denied by the lower court and by the Appellate Term. The Appellate Division, Second Department reversed the lower court decisions and awarded attorney’s fees to the tenant.
The Appellate Division based its reversal on paragraph 16 of the pre-printed form lease which permits a landlord to recover reasonable legal fees incurred in obtaining possession and re-renting the apartment after termination of the lease. In opposition to the motion for legal fees, the landlord argued that this lease provision applied only to legal fees incurred in re-renting an apartment vacated by an eviction — not the case here — and therefore did not support the tenant’s claim for attorney’s fees. The tenant argued that by demanding attorney’s fees in the Notice to Cure, the Landlord admitted that the lease authorized an award of attorney’s fees.
After analyzing the legislative intent in enacting RPL §234, the Court turned to the lease clause in question. While recognizing that lease paragraph 16 was “not an all inclusive attorney’s fee provision, it does permit the landlord, under the circumstances described, to recover an attorney’s fee in litigation occasioned by the tenant’s failure to perform an obligation set forth in a covenant of the lease.” Thus, the Court reasoned, lease paragraph 16 fit squarely within the statute because it provides for the landlord to recover attorney’s fees resulting from the tenant’s failure to perform a covenant or agreement contained in the lease.
Apparently recognizing that its decision would be viewed as expanding the circumstances when legal fees could be awarded, the Court cited to the “remedial purpose of section 234″ and the “basic tenet of statutory construction that the mischief to be corrected and the spirit and purpose of the statute must be considered in construing the statutory language,” to support its decision.
The Appellate Division, Second Department has clarified for both landlords and tenants the circumstances under which legal fees may be awarded to residential tenants. Whether landlords will be deterred from commencing eviction proceedings as a result of this decision remains to be seen.