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New Jersey Statute Expands Residential Tenant's Ability to Recover Attorneys' Fees From Landlords

January 17, 2014

Generally, successful litigants in American courts are not entitled to recover their attorneys' fees from the losing party.  However, most standard residential leases in New Jersey and other states allow a landlord who pursues legal action for a breach of the lease to recover from the tenant its attorneys fees in addition to unpaid rent and other damages.  Because residential tenants are typically unable to negotiate the boilerplate language in their leases, landlords are often seen as having a significant bargaining advantage over tenants.  This type of attorneys' fees clause is frequently perceived as an example of a tenant's disadvantage because it is regularly ignored by tenants when entering into a lease but can result in a tenant paying hundreds or thousands of dollars of their landlord's attorneys' fees arising out of the breach of their lease agreement.  A recent New Jersey statute attempts to level the playing field.  

In an effort to balance the landlord-tenant relationship, New Jersey landlord-tenant statutes now provide that "[i]f a residential lease agreement provides that the landlord is or may be entitled to recover either attorney's fees or expenses, or both, incurred as a result of the failure of the tenant to perform any covenant or agreement in the lease, or if the lease provides that such costs may be recovered as additional rent, the court shall read an additional parallel implied covenant into the lease."  NJ ST 2A:18-61.66, effective January 17, 2014. 

Including leases already in effect, if a lease provides that a successful landlord may recover attorneys' fees, New Jersey courts are now required to read in an implied reciprocal covenant permitting the tenant to also recover attorneys' fees.  If applicable, a tenant may recover attorneys' fees when successfully defending an action initiated by the landlord or when prevailing in an action initiated against the landlord alleging the landlord's breach of the lease.  The landlord is permitted to pay the tenant's attorneys' fees as cash or as a credit against future rent.  The statute further provides that any attempted waiver of the implied covenant shall be void as against public policy. 

Lastly, for all future leases, if a landlord's attorneys' fees provision is included, then the lease must also contain the following provision in a bold typeface and in a font size no less than one point larger than the point size of the rest of the lease clause or 11 points, whichever is larger:

"IF THE TENANT IS SUCCESSFUL IN ANY ACTION OR SUMMARY PROCEEDING ARISING OUT OF THIS LEASE, THE TENANT SHALL RECOVER ATTORNEY'S FEES OR EXPENSES, OR BOTH FROM THE LANDLORD TO THE SAME EXTENT THE LANDLORD IS ENTITLED TO RECOVER ATTORNEY'S FEES OR EXPENSES, OR BOTH AS PROVIDED IN THIS LEASE."

NJ ST 2A:18-61.67

Interestingly, the statute is silent on the effect of omitting the above-quoted language when so required, but it is unlikely that it would cause a court to invalidate a lease in its entirety.  Rather, the omission of the necessary language will likely prevent a prevailing landlord from recovering attorneys' fees in an otherwise deserving situation. 

These new statutes can be expected to have several important consequences for both tenants and landlords.  First, tenants may be more likely to obtain legal counsel knowing that they can recover out of pocket legal costs if they are successful against the landlord.  Providing greater and more cost-effective access to legal counsel for tenants is expected to prevent the truly disreputable landlords from taking advantage of tenants. 

However, landlords should also be aware of potential negative effects.  Because the statute applies to leases already in effect, landlords may be faced with the payment of additional costs arising out of the payment of tenants' legal fees that could not have been anticipated when entering into existing leases.  The statute is also likely to incentivize more legal action initiated by tenants, which will further drive up the landlord's own legal costs.  Lastly, when drafting future leases New Jersey landlords will be forced with a decision of whether to include a mutual attorneys' fees provision or none at all.  Eliminating the landlord's ability to recover attorneys' fees could modify the eviction process, alter the established landlord-tenant bargaining power or otherwise negatively affect the landlord's current business practices. 

By comparison, Pennsylvania landlord-tenant statutes are silent concerning attorneys' fees but courts have upheld clauses permitting attorneys' fees only in the landlord's favor.  See Bayne v. Smith, 965 A.2d 265 (Pa. Super. 2009).  However, the Delaware Landlord-Tenant Code provides that any provision in a rental agreement providing for the recovery of attorneys’ fees by either party shall not be enforceable.  Del. Code Ann. tit. 25, § 5111. 

For more information regarding the New Jersey statute or a landlord tenant matter in general, contact Kenneth J. Fleisher at kjfleisher@zarwin.com or Ryan D. Harmon at rdharmon@zarwin.com, members of Zarwin Baum’s Real Estate Practice Group, or call Ken or Ryan at 215-569-2800.


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