Landlord & Tenant

Court of Appeals Adopts Broad Construction of RPL 234

Graham Court Owners Corp. v. Taylor

NYLJ 2/20/15, p. 23, col. 2

Court of Appeals

(Opinion by Rivera, J.)

In landlord's summary holdover proceeding, landlord appealed from the Appellate Division's grant of tenant's claim of attorneys' fees pursuant to Real Property Law section 234. The Court of Appeals affirmed, holding that RPL section 234 entitles a successful tenant to attorneys' fees even if the lease provision would entitle a successful landlord to fees only if landlord relets the premises.

After tenant brought a successful rent overcharge complaint against landlord, resulting in a rent-reduction order and an award of treble damages, landlord brought the instant summary holdover proceeding seeking to evict tenant and regain possession. Landlord alleged that tenant had breached by filing to obtain prior written consent to installing a new electrical system in the kitchen. Tenant denied any breach, and also asserted a defense of retaliatory eviction. Tenant also counterclaimed for attorneys' fees, both under section 223-b, relating to retaliatory eviction, and under section 234. Civil Court dismissed landlord's proceeding, and granted tenant attorneys' fees based on the retaliatory eviction statute, but not under section 234. The Appellate Term modified to deny all attorneys' fees, but a divided Appellate Term modified again, this time holding that tenant was entitled to attorneys' fees under RPL section 234. Landlord appealed.

In affirming, the Court of Appeals started by quoting the language of section 234, which makes tenant eligible for attorneys' fees whenever a lease permits the landlord, in an action or summary proceeding, to recover attorneys' fees as a result of tenant's breach. The court then turned to paragraph 15 of the subject lease, which provides that when landlord serves a notice to cure a default and tenant fails to cure, landlord may cancel the lease and retake possession by means of an eviction proceeding. Paragraph 15 then provides that upon cancellation, tenant remains liable for rent for the remainder of the lease term, and provides that if landlord retakes possession and collects rent from re-renting the premises, the rent received from a subsequent tenant shall be used first to pay landlord's expenses, including reasonable legal fees for obtaining possession.

The court held that this provision was sufficient to trigger tenant's implied right to obtain reciprocal legal fees if tenant proves successful. The court rejected landlord's argument that paragraph 15 merely entitles landlord to recover costs of reletting the premises and not for litigating tenant's breach. Instead, the court concluded that the lease provision entitled landlord to recover attorneys' fees incurred as a result of tenant's breach of a leasehold covenant, thus triggering section 234. The court then concluded that tenant was a prevailing party in this case, and therefore entitled to attorneys' fees.

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Court of Appeals Adopts Broad Construction of RPL 234

Graham Court Owners Corp. v. Taylor

NYLJ 2/20/15, p. 23, col. 2

Court of Appeals

(Opinion by Rivera, J.)

In landlord's summary holdover proceeding, landlord appealed from the Appellate Division's grant of tenant's claim of attorneys' fees pursuant to Real Property Law section 234. The Court of Appeals affirmed, holding that RPL section 234 entitles a successful tenant to attorneys' fees even if the lease provision would entitle a successful landlord to fees only if landlord relets the premises.

After tenant brought a successful rent overcharge complaint against landlord, resulting in a rent-reduction order and an award of treble damages, landlord brought the instant summary holdover proceeding seeking to evict tenant and regain possession. Landlord alleged that tenant had breached by filing to obtain prior written consent to installing a new electrical system in the kitchen. Tenant denied any breach, and also asserted a defense of retaliatory eviction. Tenant also counterclaimed for attorneys' fees, both under section 223-b, relating to retaliatory eviction, and under section 234. Civil Court dismissed landlord's proceeding, and granted tenant attorneys' fees based on the retaliatory eviction statute, but not under section 234. The Appellate Term modified to deny all attorneys' fees, but a divided Appellate Term modified again, this time holding that tenant was entitled to attorneys' fees under RPL section 234. Landlord appealed.

In affirming, the Court of Appeals started by quoting the language of section 234, which makes tenant eligible for attorneys' fees whenever a lease permits the landlord, in an action or summary proceeding, to recover attorneys' fees as a result of tenant's breach. The court then turned to paragraph 15 of the subject lease, which provides that when landlord serves a notice to cure a default and tenant fails to cure, landlord may cancel the lease and retake possession by means of an eviction proceeding. Paragraph 15 then provides that upon cancellation, tenant remains liable for rent for the remainder of the lease term, and provides that if landlord retakes possession and collects rent from re-renting the premises, the rent received from a subsequent tenant shall be used first to pay landlord's expenses, including reasonable legal fees for obtaining possession.

The court held that this provision was sufficient to trigger tenant's implied right to obtain reciprocal legal fees if tenant proves successful. The court rejected landlord's argument that paragraph 15 merely entitles landlord to recover costs of reletting the premises and not for litigating tenant's breach. Instead, the court concluded that the lease provision entitled landlord to recover attorneys' fees incurred as a result of tenant's breach of a leasehold covenant, thus triggering section 234. The court then concluded that tenant was a prevailing party in this case, and therefore entitled to attorneys' fees.

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