Landlords are generally the parties that prepare the lease agreements into which their tenants enter. This unequal bargaining power typically allows landlords to insert language that requires tenants to pay the landlord’s attorney’s fees for any legal claims that arise out of their agreement, but does not require the landlord to pay the tenant’s attorneys fees for breach of the lease terms by the landlord. New York law requires there to be either a contractual or statutory basis for a prevailing party to collect attorney’s fees. But if there is no express language in a lease agreement allowing for tenants to demand attorney’s fees from landlords, does that mean tenants will not able to collect them?
This question was at issue in a recent New York case. Casamento v. Juaregui. Casamento v. Juaregui, 2011 WL 4090175 (2d. Dept. 2011). In the case, Luis Juaregui (“the tenant”) entered into a lease agreement for a Queens apartment owned by Dominic Casamento (“the landlord”). Paragraph 7 of the agreement required the tenant to receive the prior written consent of the landlord before making any alterations to his apartment. Paragraph 10 held the tenant liable for any damages or expenses incurred by the landlord relating to any neglectful act of the tenant. Additionally, paragraph 16 specifically referred to attorneys’ fees, stating that “[a]ny rent received by Landlord for the re-renting shall be used first to pay Landlord’s expenses” and including “reasonable legal fees” within the definition of “expenses.” Id. at 288.
In March 2007, the landlord alleged that the tenant had violated paragraphs 7 and 10 by making alterations to certain rooms without the landlord’s consent and also claimed the tenant was responsible, per the terms of the lease, for the landlord’s legal fees. He served a notice of termination and commenced a holdover proceeding.
The question for the court in Casamento was whether the lease at issue was covered by Real Property Law (“RPL”) §234. That law governs residential leases and addresses the imbalance resulting from the unequal bargaining power between landlords and tenants. It establishes an implied covenant that addresses when a tenant will be able to recover attorneys’ fees incurred in the successful defense of a summary proceeding to recover possession of a leasehold. If the court determines that the lease is covered by §234, the tenant should be able to collect attorney’s fees from the landlord.
Section 234 states that courts shall construe a lease to include this implied covenant whenever:
1) 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 a tenant to perform any covenant or agreement contained in such lease, or
2) that amounts paid by the landlord therefore shall be paid by the tenant as additional rent
See RPL §234.
The Casamento Court determined that the outcome of any claim pursuant to §234 depends upon an analysis of the specific language of the lease provision at issue. In that case, it held that “Paragraph 16, thus, literally fits within the language of the first prong of section 234, since it does ‘provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of a failure of the tenant to perform any covenant or agreement contained in such lease.’” Additionally, the court found that construing the covenant in favor of the tenant is “consistent with the Legislature’s remedial purpose of effecting mutuality in landlord-tenant litigation and helping to deter frivolous and harassing litigation by landlords who wish to evict tenants.” The court said that RPL §234 helps avoid a situation where a landlord would have nothing to lose by instituting an eviction proceeding with a frivolous factual basis where there was prospect of re- enting for a higher amount and the lease included a provision enabling the landlord to recover attorney’s fees. Because the Court determined that RPL §234 applied, it held that tenants can recover attorney’s fees from landlords.
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