Should You Include an Attorney’s Fees Clause in a Lease?

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In leases between a landlord and a tenant, it is usually the landlord that has the power of drafting the lease. Although both parties must obviously agree to the terms before signing, it is obviously easier in many cases for the party drafting the contract to insert a term at the outset than it is for the other party to attempt to add a clause later. Landlords creating leases may be tempted to include an attorney’s fees clause in a lease, which gives them the right to demand attorney fees from the tenant in any action arising from the lease. Having someone else pay your attorney fees sounds great in principle, but California law imposes a number of conditions on such clauses which can result in unintended negative consequences for the party inserting the clause. Here are a couple things to keep in mind before inserting an attorney’s fees clause in a lease.

The Clause Can Be Used Against You, Regardless of How it Is Drafted

Under California law, if an attorney’s fees clause is inserted in a contract, then a judge will award attorney’s fees to whoever the prevailing party is, regardless of whether the contract specifies only one party should receive fees. Thus, if you insert an attorney’s fees clause specifying only you should receive fees, be prepared to pay the other party’s fees as well if you lose.

The Court Will Determine What Reasonable Fees Are

This may go without saying, but you should never run up a legal bill under the presumption that the other party will be the one who has to pay the exact amount specified. The court will determine what the reasonable fees should have been, not you.

The Court Determines Who “Prevails”

Most attorney’s fees clauses are written to award fees to the “prevailing” party. But if you reach a settlement that you think is favorable before a verdict is rendered, does that mean you “prevail” and should be awarded fees? Maybe, maybe not. You do not have to proceed to a final judgment for a court to award you attorney’s fees, but it is within the court’s discretion to determine which party prevails for purposes of fees, and it may determine that neither party prevailed.

Attorney’s Fees May Be Deducted from Non-contractual Damages

If you bring multiple claims against a tenant which include claims not made pursuant to the lease, and you prevail on all, then the court may decide to reduce the non-contractual damages you are owed by the amount of attorney’s fees you are awarded.

Talk to a Los Angeles Real Estate Attorney

If you have any questions on lease formation or interpretation, an experienced Los Angeles real estate attorney can help. Attorney Laine T. Wagenseller of Wagenseller Law Firm has published numerous articles on real estate law and works with individuals and businesses across Southern California in resolving real estate matters. Contact Wagenseller Law Firm today to schedule a consultation in order to discuss your real estate law questions.