When lease-related disputes arise, tenants will frequently file lawsuits against their landlords asking judges to determine the parties' rights and obligations.
If a court should side with the landlord, are the landlord's legal fees and related costs recoverable from the tenant?
The answer to that question will depend on what the governing lease agreement provides and how a court interprets the operative language.
By way of example, a popular lease form circulated by the Real Estate Board of New York (REBNY), 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, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in 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 expenditure 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. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner, as damages.
Arguably, if a dispute has nothing to do with a tenant's "default," or should the case not involve the payment of rent, or other monetary obligation, then that provision would not entitle a landlord to recover its fees or costs.
In a case decided just a few weeks ago by the Appellate Division, First Department, the AD1 "strictly construed" an attorneys' fee provision and concluded that no compensation could be awarded to the landlord despite its successful defense of a declaratory judgment action brought by its tenant.
In Andrews 44 Coffee Shops Inc. v TST/TMW 405 Lexington, L.P. , there was a disagreement over the Chrysler Building's implementation of new security protocols. When the tenant lost the case, the New York County Supreme Court decided that the landlord was entitled to the reimbursement of its legal fees and costs.
On appeal the AD1 reversed. While the decision fails to provide an excerpt of the pertinent lease related language, here's why the AD1 found against the owner:
Bearing in mind that agreements providing for payment of attorneys' fees should be construed strictly ... and noting our aim for "a practical interpretation of the expressions of the parties to the end that there be a realization of [their] reasonable expectations'" ... we find that the relevant lease provisions do not warrant recovery of attorneys' fees for successful defense in the declaratory judgment action.
For a copy of the Appellate Division's decision, please use this link: Andrews 44 Coffee Shops Inc. v. TST/TMW 405 Lexington, L.P.