Most residential leases in New York, including proprietary leases for cooperative apartments as well as ordinary rental leases, provide that if the landlord prevails in litigation against the tenant arising from the tenant’s breach of the lease, the landlord is entitled to recover its attorneys’ fees. Section 234 of the New York Real Property Law (RPL) provides that any such provision in a residential lease is automatically deemed to be reciprocal, so that if the tenant is the prevailing party in a proceeding arising from an alleged breach of the lease, the tenant is entitled to recover reasonable legal fees from the landlord. In several recent cases, courts have had to address what types of litigation will trigger an award of attorneys’ fees under this statute.

 

Graham Court Owners Corp. v. Taylor, 2014 WL 211224, 2014 N.Y. Slip Op. 00311 (1st Dep’t Jan. 21, 2014), is a recent appellate decision applying RPL 234. In this case, the Appellate Division concluded, by a divided vote of 3 to 2, that the tenant was entitled to recover its attorneys’ fees. The tenant had moved into what he was told was a non-rent-regulated apartment in Manhattan. He subsequently filed a rent overcharge claim with the New York City Department of Housing and Community Renewal (DHCR), asserting that the apartment was rent-regulated. The landlord argued that the apartment became deregulated because it performed $60,000 in renovations before the tenant took occupancy. The tenant asserted that he, not the landlord, renovated the apartment, and the DHCR upheld the tenant’s position.

 

Soon after, the landlord filed a holdover proceeding, seeking to evict the tenant for making unauthorized changes to the apartment. The Civil Court ruled for the tenant, finding that the landlord’s key witness was not credible. The tenant sought attorneys’ fees under RPL 223-b, which authorizes an award of fees where an eviction proceeding is retaliatory, as well as under RPL 234.

 

The applicable lease provision in this case provided that if the lease was terminated as a result of the tenant’s default, the landlord would be entitled to re-let the apartment. The lease further provided that any rent received from re-letting the premises would be first used to pay the landlord’s expenses, including legal fees, before being applied to any amounts the tenant owed under the prior lease. The Appellate Division ruled that this lease provision triggered the application of RPL 234, so that the prevailing tenant was entitled to recover its legal fees.

 

In its decision, the court acknowledged that some of its prior rulings on this issue had been inconsistent. However, it concluded that a lease provision providing for the landlord to recoup its attorneys’ fees after eviction and re-letting had the same substantive effect as an express lease provision providing for the landlord to recover fees, so RPL 234 applied equally to both. The case was remanded to the trial court to determine the amount of the fee award. Because fees would be awarded under RPL 234, the court found no need to determine whether the tenant was also entitled to them under RPL 223-b.