You May Lose Your Right To Collect Attorneys’ Fees.
“They just wanted money so I ignored their letter.” We hear this explanation often. Our client received a letter from a lawyer on behalf of a property buyer complaining about something at the property. Our client ignored the letter. Later the buyer filed a lawsuit and served the client with a summons and complaint. And now our client is at risk of having to pay the other side’s attorneys’ fees if he loses but has waived the right to collect attorneys’ fees if he wins. This changes the potential cost-benefit analysis of the entire case.
Many contracts include language which states that the Parties agree to mediate any dispute or claim arising between them arising out of the Agreement. It then says that if a party commences an action without first attempting to mediate or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorneys’ fees, even if they would otherwise be available to that party.
Because this demand is made by letter rather than in a lawsuit, many recipients of these demand letters simply ignore them and do not retain an experienced real estate lawyer to help them deal with the issue. Because they do not retain an attorney they are often unaware of the legal effects of refusing to promptly reply to the demand for mediation. Tip one would be to have a lawyer review every lawyer demand letter you receive.
When a breach of contract lawsuit is eventually filed, it is often too late for the newly retained attorney to do anything to anything to correct the problem. The threat of having to pay attorneys’ fees is often a driving force in litigation. Attorneys’ fees can be a large part of the potential liability to the other side. Even if you are certain of victory, the evaluation of your case will change if you do not have the ability to recover your attorneys’ fees after all is said and done. For example, you would not spend $100,000 in attorneys’ fees to recover $80,000 in damages unless you could be sure of recouping those attorneys’ fees. If you fail to respond to the demand for mediation you are foreclosed from collecting your attorneys’ fees even if you win.