Most “standard” real estate contracts and leases contain provisions that state something to the effect, “If there is any dispute as to the agreement, the winning party is entitled to Attorneys fees.” Is this a good idea?

Well, yes and no. First, understand that Attorneys charges are generally not awarded to the winning party in a lawsuit. There must be either a specific statutory provision or a clause in the disputed agreement that calls for Attorneys fees. In addition, a court may award Attorneys costs where there is “bad faith” on the part of one of the litigants, but judges rarely enforce this rule.

If you have to sue another group to a lease or contract for $100, it hardly seems worth the effort if you have to pay your attorneys $2,500 to file the lawsuit. In such cases, the opposing group may thumb his nose at you and say, “so sue me”. The judicial system is very unfair to the poor in this regard. However, if you are the potential defendant, it works in your favor if someone is thinking of suing you for some bogus reason and you know that they can’t afford an Attorney.

So, should you always insert an Attorneys fee clause in every contract or lease that you sign? Well, that depends on whether such a statement inures to your benefit. For example, if you are a landlord, chances are you will be suing your tenant for non-performance of the lease, not vice-versa. So, having the ability to get Attorneys costs if you win is to your benefit. Of course, this may be futile, since any judgment may be uncollectible, whether for $100 or $10,000. But, if you think you can collect a judgment, go ahead and put it in your lease.

Another example might be a purchase contract with a seller in foreclosure. Suppose you have an arrangement to buy a property from a seller who is near insolvency. If he breaches the arrangement, you can sue, but what will you get? On the other hand, if he can convince a court that YOU are in breach, you could lose and end up paying HIS Attorneys charges. Thus, you can see how an Attorneys fee clause may work against you. If you get into a dispute with a seller or buyer and they cannot afford any Attorneys, you reduce your risk if something goes bad. Remember, whether you are right or wrong in your actions involving a real estate deal, it’s what is proven in court that matters. Having plenty of trial experience, I can tell you that going to court is a gamble - sometimes you win, sometimes you lose, and truth and justice have little to do with it.

Finally, some agreements will state that if one party must enforce the deal in court (e.g., the landlord in a lease), the landlord is entitled to attorneys fees. Many courts will apply the rules in reverse, even if the contract doesn’t explicitly state. So, you cannot necessarily limit attorneys fee if one party wins but not the other.

As with any transaction, you could consult with an attorney before drafting any agreement you are uncertain of.