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EVEN THOUGH THE COOPERATIVE LANDLORD WON IN THE UNDERLYING LITIGATION AGAINST A SHAREHOLDER TENANT, THE LEASE PROVISION REQUIRING THE TENANT TO PAY ATTORNEY’S FEES REGARDLESS OF DEFAULT OR MERIT WAS UNENFORCEABLE AS UNCONSCIONABLE (FIRST DEPT). ​

The First Department, reversing Supreme Court, determined the lease provision which provides for attorney’s fees regardless of default or merit unenforceable as unconscionable:

Because the lease provides for attorneys’ fees regardless of default or merit, in a dispute between a residential co-op [The Dakota] and a shareholder tenant [Fletcher] , we find this provision to be unenforceable as unconscionable … . The lease is not “silent as to whether such right is contingent upon the merits of plaintiff’s action” … , but explicitly provides for attorneys’ fees whenever the tenant sues The Dakota. This interpretation is not changed by the description of the fees as “reasonable” … . “Bearing in mind that agreements providing for payment of attorneys’ fees should be construed strictly” … , we will not rewrite the parties’ agreement simply because The Dakota prevailed in the underlying litigation … .”To enforce such a provision would produce an unjust result because it would dissuade aggrieved parties from pursuing litigation and preclude tenant-shareholders from making meaningful decisions about how to vindicate their rights in legitimate instances of landlord default” … . Kasowitz, Benson, Torres & Friedman, LLP v JPMorgan Chase Bank, N.A., 2025 NY Slip Op 00396, First Dept 1-28-25

Practice Point: A lease provision which requires a tenant to pay attorney’s fees regardless of default or merit is unconscionable and will not be enforced even where the landlord won the underlying litigation.

 

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