Attorney’s Fees Clause- A Second Thought

It may be wise to think twice before including prevailing party attorney’s fees clauses in standard residential and/or commercial lease agreements.  Under established law, each party to an agreement is responsible for paying its own attorney’s fees unless provided by statute or the language of the contract.  The attorney’s fees clause is usually standard language in all real estate lease agreements we encounter.

In the last few years, the “attorney’s fees clause” has often times worked to the landlord’s disadvantage in litigation involving habitability claims (substandard and/or dangerous housing) or exposure to various toxins in commercial settings.  Often times it is the attorney’s fees clause that drives litigation against the landlord and increases the value of an otherwise insignificant claim.  (Note: uncorrected statutory violations can still give rise to the recovery of attorney’s fees in habitability cases.)

How is the lessor affected if the clause is removed?  The odds of collecting attorney’s fees on a deadbeat tenant who must be evicted, a tenant who damages some fixtures, or absconds in the middle of the night are problematic at best.

However, the opportunity to curtail or eliminate altogether multi-party habitability claims or specious toxic exposure issues may be far more valuable to the lessor down the road.  It is certainly worth a second thought.

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