The Law Of Attorney’ Fees – What You Don’t Know Can Cost You

Attorneys’ fees are an important factor in a landlord tenant case. Because smaller amounts are usually at stake, the amount of attorneys’ fees frequently equals or exceeds for example the amount of rent owed, the security deposit at issue, or the damaged carpet.  While it is possible to get out for less, the minimum cost for a county court lawsuit is around $2,000.  If it is a complicated or ongoing matter, fees can exceed $5,000. These are only the fees we charge you.  In many landlord tenant cases, attorneys’ fees are a winner takes all proposition.  Thus, if you lose, you may have to pay both your attorneys’ fees and the tenants.  The possibility of paying both your tenant’s attorney and us only reinforces the fact that attorneys’ fees are usually the decisive factor in analyzing county court landlord tenant litigation.

Similar to most states, Colorado follows the American rule when awarding attorneys’ fees in lawsuits.  Under the American rule, landlords can only recover attorneys’ fees from tenants in court pursuant to statute or contract.  The Colorado eviction statute allows the prevailing party in any eviction to recover reasonable attorney fees if the residential rental agreement between the parties contains a provision for either party to obtain attorney fees.  Because there are many other types of lawsuits between landlords and tenants, for example collection cases, a well-written lease should have an attorney fee provision so that a landlord can recover attorneys’ fees in most cases pursuant to contract in absence of a statutory right to recover fees.  As we will see, in some cases it may be more advantageous not to recover fees if you win in order to prevent a tenant from recovering fees if the tenant should win.

Leases can address attorneys’ fees in three ways.  First, a lease can fail to address attorneys’ fees or specifically state neither party gets fees.  Under a no-sided clause or in the absence of a clause, neither landlord nor tenant gets attorneys’ fees unless a statute awards them for the issue being litigated.  Second, a lease can contain a one-sided attorney fee clause.  A one-sided attorney fee clause awards fees, usually to the landlord if the landlord prevails, but the tenant does not get fees if the tenant prevails.  Third, a lease can contain a two-sided fee clause, which is sometimes referred to as a prevailing party clause.  Under a two-sided fee clause, the winner gets attorneys’ fees.

While attorneys’ fees are an important issue in almost every landlord tenant case, fees have taken on greater importance in warranty of habitability cases, because approximately sixty percent of all answers in eviction cases now raise warranty of habitability issues.  The Colorado Warranty of Habitability Act (the “WH Act”) became law in September of 2008.  The WH Act was drafted by a task force created by Governor’s office. The task force was composed of all interested parties such as apartment associations, realtors, and tenant advocacy groups.  The task force analyzed and debated at length the issue of attorneys’ fees in warranty of habitability cases.  The result of that debate was that neither landlord nor tenant would get attorneys’ fees under the WH Act unless the lease contained a two- sided attorney fee provision. The thinking was that if landlords kept a one-sided provision, they wouldn’t get fees, but the tenant’s inability to get fees would keep warranty of habitability lawsuits in check.

However, recently county courts have been misinterpreting the WH Act to award fees to tenants in warranty of habitability related cases.  Many of us remember the famous line “it depends on what the meaning of is, is”.   When it comes to the warranty of habitability act, it depends on the meaning of “either”.  The Act provides that a prevailing party shall be entitled to recover attorneys’ fees but only if a lease contains a provision for “either” party to obtain fees.  The courts have wrongly held that either means “one or the other of two”.  For example, you may sit on either side of a table.  Using this interpretation, some courts are awarding tenants fees as the winning party in a warranty of habitability even where the lease has a one-sided attorney fee provision. 

The problem with these recent rulings is that they clearly ignore the legislative history of the WH Act.  During the legislative process, the landlords and tenants took opposite positions.  Landlords did not want an attorney fee provision in the law.  Landlords were concerned that an attorney fee provision would only encourage hungry attorneys to take gambles on marginal cases in hopes of collecting big fee awards from deep pocketed landlords.  Tenant attorneys argued that many leases contained one-sided attorney fee provisions in favor of landlords, which made for an un-level playing field. Tenants should not be unfairly denied attorneys’ fees if they won a warranty of habitability case when landlords would be awarded fees if they won.

Ultimately, landlords and tenants compromised on the attorney fee language in the WH Act.  Landlords and tenants agreed neither side would get fees in a warranty of habitability case unless the lease provided for the prevailing party to recover fees, i.e. a two-sided attorney fee provision.  Thus, the word “either” in the statute was intended to mean each of two or both.  For example, there are trees on either side of the river. Despite this fact, more and more courts are awarding tenants attorneys’ fees in warranty of habitability cases with one-sided attorney fee provisions.

These recent bad rulings have significant negative consequences.  The rulings undermine a landlord’s right to contract for a specific result.  Many landlords have one-sided provisions in their leases to discourage groundless litigation against them.  When a court turns a one-sided provision into a two-sided provision, the court undermines the benefit of the landlord’s bargain and shifts significant risk back onto the landlord in direct contravention of the landlord’s agreement.  Because many landlords are not aware of these recent court rulings, they may make bad litigation decisions.  Specifically, landlords may continue with a lawsuit involving warranty of habitability issues that they would have settled if they knew the substantial risk of having to pay a tenant’s attorney thousands of dollars in attorneys’ fees.  Because attorneys are attracted to any issue that generates attorneys’ fees, the recent rulings from the courts will significantly increase the number of warranty of habitability lawsuits against landlords.

Because attorneys’ fees are a significant factor in landlord tenant lawsuits, you should be familiar with the law of attorneys’ fees and related lease language.  Your lease should award you fees in most cases if you win, but deny tenant’s fees if they win in order to discourage litigation against you.  Generally, you accomplish this through the use of a one-sided attorney fee provision in your lease.  However, the law of attorneys’ fees is evolving, and has become more complicated with recent court rulings in warranty of habitability cases.  The one-sided attorney fee provision is no longer the perfect solution to every attorney fee issue.  Lease language should be adjusted to address recent court rulings.  A tenant’s inability to recover attorneys’ fees from you will discourage lawsuits against you.  No attorneys’ fees means few if any attorneys are willing to take the case.  Thus, no attorneys’ fees means far fewer lawsuits.  In warranty of habitability related cases, in order to eliminate a tenant from being awarded attorneys’ fees if they win, you have to accept that you can’t get attorneys’ fees if you win.

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