Attorney Fees Under RPL Section 234
Real Property Law (RPL) Section 234 provides in pertinent part that "[w]henever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys' fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease…, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys' fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease…."
Thus, under RPL §234, when a residential lease contains a provision entitling the landlord in a summary proceeding to recover attorney fees and/or expenses based on the tenant's breach of the lease, there is implied in the lease a reciprocal covenant for the landlord to pay the tenant's attorney fees and/or expenses based on the landlord's default or when the tenant is successful in defending a summary proceeding.
In a 3-2 decision decided just last week by the Appellate Division, First Department in Graham Court Owner's Corp. v. Taylor,1 the issue before the court was whether the following language in paragraph 15 of the parties' residential lease was adequate to invoke the reciprocal mandate of RPL §234:
"(D) If this Lease is cancelled, or Landlord takes back the Apartment, the following takes place:
(3) Any rent received by Landlord for the re-renting shall be used first to pay Landlord's expenses and second to pay any amounts Tenant owes under this Lease. Landlord's expenses include the costs of getting possession and re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs."2
Relying in part on the First Department's 1992 ruling in Bunny Realty v. Miller3, the majority in Graham, in an opinion written by Justice Dianne T. Renwick in which Justices Karla Moskowitz and Judith J. Gische concurred, held that the lease provision at issue did entitle the tenant to recover his attorney fees under RPL §234 and remanded the matter to Civil Court for a hearing to determine the tenant's attorney fees.
In so holding, the majority refused to follow the First Department's prior holdings in Oxford Towers.v. Wagner4 and Madison-68 v. Malpass,5 which both held that RPL §234 was not invoked by the virtually identical language at issue in Bunny Realty and now in Graham. Justices John W. Sweeny, Jr. and Leland G. DeGrasse dissented.
The facts as recited by the majority in Graham are as follows. In May 2004, the tenant and landlord entered into a lease for an unregulated apartment in Manhattan for $2,200 per month. In October 2005, the tenant filed a rent overcharge complaint with the New York State Division of Housing and Community Renewal (DHCR), claiming that he was never made aware that the apartment was subject to rent stabilization when he took occupancy. The landlord opposed the complaint on the ground that the apartment became deregulated because the landlord performed $60,000 in renovations to the apartment before the tenant took occupancy. In response, the tenant submitted proof that he, not the landlord, performed the renovations. DHCR ruled in favor of the tenant and found that there had been an overcharge and that the apartment remained rent-regulated. Supreme Court thereafter dismissed the landlord's Article 78 petition challenging DHCR's ruling, and the Appellate Division affirmed.
Thereafter, the landlord accused the tenant of having made unauthorized alterations to the apartment, in violation of the lease provision requiring the tenant to obtain the landlord's "prior written consent" before making any alterations. On March 30, 2007, the landlord served the tenant with a notice to cure claiming that the tenant had installed a new electrical system in the kitchen without landlord's prior written consent and thereafter, on April 23, 2007, served a notice of termination citing the tenant's failure to cure.
The landlord thereafter commenced a summary holdover proceeding in Civil Court, New York County in which the landlord sought an award of possession of the apartment and "legal fees in the amount of $3,000." The tenant asserted a defense of retaliatory eviction and counterclaims for attorney fees and damages. The tenant claimed that his work in the apartment did not violate the lease because the work "was performed to remedy hazardous conditions…."6
After a non-jury trial, Civil Court dismissed the holdover proceeding, finding that the landlord's agents had specifically authorized the tenant to make the alterations. The court specifically found that the landlord's principal had "lied repeatedly and obviously" at trial.7 The court further found that the landlord had commenced the proceeding in retaliation for the tenant's successful rent overcharge claim. The court denied the tenant's claim for attorney fees under RPL §234, but granted the tenant attorney fees under RPL §223-b(5) as part of his damages for retaliatory eviction.