Chapter 22 - § 22.5 • LEGAL FEES

• Jurisdiction: Colorado

§ 22.5 • LEGAL FEES

Almost all leases provide that the tenant is liable for any legal fees the landlord incurs as the result of the tenant's default.⁹⁴

While "attorney fees" is the more common term, some landlords prefer "legal fees" because it is a broader term. At least one Colorado case held that a paralegal's fee is not included within an attorney fees clause.⁹⁵ Some leases list what is included in legal fees, mentioning such things as court costs, paralegal fees, expert witness fees, document reproduction expenses, costs of exhibit preparation, courier charges, postage, communications expenses, appraisals, and an allocation for in-house counsel. A landlord who handles default matters with an in-house legal staff might want to specify that the cost of the in-house counsel may be charged to the tenant. The landlord may also provide that the tenant must pay the landlord's legal fees even if the landlord never brings an action to enforce the terms of the lease. For example, if the tenant defaults and the landlord's attorneys draft a default letter and negotiate a cure or settlement, some landlords will require the tenant to pay these costs.

Some leases provide that the landlord gets its legal fees if it prevails, but the tenant does not if it prevails. There is some authority that a one-sided legal fees provision is not enforceable if it imposes a "penalty" by failing to properly calculate fees.⁹⁶ In any event, a tenant will want to resist a one-sided legal fees clause. In a one-sided legal fees clause, a tenant wants the landlord to be able to collect legal fees only if a court has actually held that the tenant is in default, not merely because the landlord claims a default. For an FED claim, the prevailing party, whether it is the landlord or tenant, is entitled to fees pursuant to statute.⁹⁷

The parties may want to replace "the prevailing party" with "the substantially prevailing party." That helps the landlord get its attorney fees when, for example, the landlord proves the tenant is in default and is awarded back rent, but the tenant wins its claim that the leaky roof the landlord failed to repair damaged some of its personal property and is awarded damages for that claim. Similarly, it helps the tenant obtain its legal fees when, for example, it wins the right to terminate the lease for the landlord's default, but the landlord is awarded the rent the tenant withheld, prorated to the date of termination.

In drafting the legal fees provisions of a...