By Adam Lindenbaum and Peter B. Kane, Rosenberg & Estis, P.C.
On June 14, 2019, the New York State Legislature enacted the Housing Stability and Tenant Protection Act of 2019 (“HSTPA”). The HSTPA instantly brought about sweeping changes to the various laws and regulations that govern tenancies throughout the City and State of New York and the specialized procedures that govern landlord-tenant litigation. This article will focus on the rights of residential landlords and tenants to recover attorneys’ fees as a prevailing party to summary eviction proceedings commenced under Article 7 of the Real Property Actions and Proceedings Law (“RPAPL”) (e.g., nonpayment or holdover eviction proceedings) following the enactment of the HSTPA.
The recovery of attorneys’ fees in all litigation is governed by the “American Rule,” which generally provides that incurring attorneys’ fees is an incident of litigation, and that all parties to a controversy — the victors and the vanquished — must pay their own costs of litigation unless an award is authorized by agreement between the parties or statute. Most residential leases include one or more clauses that address the landlord’s remedies in the event of a tenant default, which often includes the recovery of attorneys’ fees and costs incurred in connection with any legal actions or proceedings taken in response to such a default.
Real Property Law (“RPL”) § 234 generally provides that where a residential lease provides for a landlord’s right to recover attorneys’ fees incurred in proceedings concerning a lease default, a reciprocal right is implied at law such that the tenant also has a right to recover fees if deemed the “prevailing party” in the litigation. For decades, RPL § 234 has served as a great equalizer of the imbalance of power between landlords and tenants, and often acted as a catalyst toward settling landlord-tenant disputes, as both landlord and tenant would reconsider their respective chances of achieving “prevailing party” status after trial.
The HSTPA amended RPL § 234, but only to the limited extent of providing that attorneys’ fees may not be recovered by a landlord in connection with a default judgment against a tenant. Thus, in analyzing RPL § 234 alone, it would appear that the HSTPA should have no effect on the right to recover attorneys’ fees in residential landlord-tenant litigation as a prevailing party. However, the HSTPA also included the newly-enacted RPAPL § 702, entitled “Rent in a Residential Dwelling,” which provides: “In a proceeding relating to a residential dwelling or housing accommodation, the term “rent” shall mean the monthly or weekly amount charged in consideration for the use and occupation of a dwelling pursuant to a written or oral rental agreement. No fees, charges or penalties other than rent may be sought in a summary proceeding pursuant to this article, notwithstanding any language to the contrary in any lease or rental agreement.”
It appears that the Legislature’s intent in enacting RPAPL § 702 was to restrict the arrears that could be sought in summary nonpayment proceedings to base rent only. Landlords are now clearly prohibited from including in their predicate statutory rent demands such additional rents as late fees, utilities, bounced check charges or attorneys’ fees that were incurred prior to, and irrespective of, a prevailing party determination. The Legislature’s rationale for this new statute is simple and understandable – it did not want to see courts issuing possessory judgments and potentially evicting tenants for ancillary charges due under a residential lease.
Since the enactment of the HSTPA, several judges of the New York City Housing Court have expressed, either formally in judicial opinions, or in informal writings or oral commentary from the bench, that the right to recover attorneys’ fees in any residential summary proceeding is now barred by RPAPL § 702. However, neither the plain text of RPAPL § 702 nor the Legislature’s intent is offended, however, by an application for a separate monetary judgment for attorneys’ fees made after the conclusion of trial and subsequent to the court’s prevailing party determination in favor of either tenant or landlord. Had the Legislature entirely sought to prohibit an attorneys’ fees claim in a summary proceeding, it would have included such prohibitions in RPL § 234 or a separate provision of law rather than make only the minor amendment to RPL § 234 to prohibit the recovery of attorneys’ fees upon a tenant default.
It is well settled that the amount of any attorneys’ fees award is always within the sound discretion of the courts. In determining the reasonableness of such fees, the court must consider relevant factors such as the nature and extent of the services rendered, the actual time spent, the necessity therefor, the nature of the issues involved, the professional standing of counsel, and the results achieved. Such a determination of reasonableness should be made by the very same court that heard and determined the proceeding, and remains in the best possible position to make a prevailing party determination. To hold otherwise would relegate the winning party to commencing a plenary action only to recover attorneys’ fees (presumably before the Supreme Court) to review claims, defenses, results and fees incurred in the previously determined summary proceeding. However, such determinations have always best been suited for the Housing Court, which was specifically established by the Legislature to hear and determine disputes in the highly-specialized area of landlord-tenant law.
Furthermore, it could not have been the Legislature’s intention in enacting RPAPL § 702 to abrogate decades of Court of Appeals case law that expressly prohibits the splitting of a cause of action based upon the interdependent covenants by a tenant to obey the clauses of a lease and to reimburse the landlord for attorneys’ fees incurred for a breach thereof. The rule against splitting causes of action, as well as principles of judicial economy, dictate that cases under a single set of facts should not be tried piecemeal and should be concluded in a single forum.
Accordingly, the interplay between newly-enacted RPAPL § 702 and the amended RPL § 234, read in conjunction with well-established legal principles unaffected by the HSTPA, is that a prevailing party should still be able to recover attorneys’ fees in a summary proceeding brought under the RPAPL. Although some Housing Court judges have recently held to the contrary, the issue must await determination from the appellate courts to provide practitioners with clear guidance as to the scope of permissible claims in a summary proceeding.