What This Clause Means
Most attorney fees clauses look like they protect both parties equally. They don't. In practice, one-sided attorney fees provisions systematically advantage landlords in lease disputes — and even 'mutual' attorney fees clauses often have hidden asymmetries that favor the party with more money to spend on litigation.
Attorney Fees Clauses Determine Who Pays the Lawyers in a Dispute
The default rule in American courts is that each party pays their own attorney's fees — win or lose. Lease attorney fees clauses change this default. A one-way clause says the tenant must pay the landlord's attorney's fees if the landlord prevails in any dispute. A mutual clause says the losing party pays the winner's fees, regardless of who that is. Attorney fees in commercial litigation can range from $15,000 for a simple breach-of-lease case to $150,000+ for complex disputes. A tenant facing a landlord with unlimited legal resources who knows the tenant must pay their fees if they lose faces enormous settlement pressure — even when they have a valid legal defense.
Even Mutual Attorney Fees Clauses Advantage the Party With More Resources
A mutual attorney fees clause sounds fair: winner gets their fees from the loser. But the practical effect is asymmetric. A large property management company with in-house counsel and deep pockets can afford to litigate aggressively. An individual tenant or small business facing the possibility of paying $80,000 in attorney's fees if they lose cannot. Even with a strong defense, the risk of a fees award pushes tenants toward settlement. Meanwhile, the landlord knows the fees clause gives them settlement leverage, so they may refuse reasonable offers. The mutual clause isn't neutral — it's a weapon that the party with more legal resources uses more effectively.
One-Way Attorney Fees Clauses Are Particularly Dangerous for Tenants
Red-flag language: 'In any proceeding arising under this Lease, Tenant shall pay Landlord's reasonable attorney's fees and costs, regardless of who prevails.' This clause makes you responsible for the landlord's legal fees even when you win. It's designed to deter tenants from asserting legal rights or defenses. A tenant who withholds rent because of a habitability problem, then gets sued by the landlord, could win the lawsuit and still owe the landlord $45,000 in attorney's fees. This clause appears in many standard commercial and residential leases without the tenant noticing, and it has enormous practical consequences for tenants who need to assert rights under their lease.
California and Some Other States Automatically Make One-Way Clauses Mutual
California Civil Code Section 1717 converts one-sided contractual attorney fees provisions to mutual ones: if a contract gives one party the right to attorney's fees, the courts will treat it as mutual. Other states have similar provisions. If you're in California, a one-way landlord attorney fees clause in your lease may automatically become a mutual provision — meaning you can recover fees from the landlord if you win a lease dispute. Check your state's law on this, because the practical effect can significantly affect your litigation risk calculus. Even with automatic mutuality, however, the risk is still asymmetric given the resources differential.
How to Negotiate Attorney Fees Provisions
Three positions, from best to worst: First, no attorney fees provision at all — each party bears their own legal costs. This removes the landlord's settlement leverage. Second, a mutual provision with a cap — prevailing party gets fees up to $25,000, regardless of actual fees incurred. This limits downside risk. Third, a mutual provision with a reasonableness standard — prevailing party gets 'reasonable attorney's fees' with the court determining what's reasonable. Avoid one-way provisions entirely. If the landlord insists on mutual fees, add a provision that fees cannot be awarded if the losing party had a 'reasonable basis' for their position — this protects both parties from fees in good-faith disputes.
In Small Disputes, the Fees Clause Often Determines the Outcome
Here's the practical reality: if your security deposit dispute is worth $3,000 and your landlord threatens to pursue attorney's fees in addition to the deposit, you're facing the prospect of a $3,000 dispute turning into a $20,000 legal battle. Even if you're right, settling for less than the full deposit amount is rational if the fees clause gives the landlord a credible threat. This is exactly why landlords include aggressive attorney fees clauses — they create negotiating leverage by making litigation economically irrational for tenants with small claims. The solution is to address it in the lease, not after a dispute arises.
What to Watch Out For
- Make attorney fees reciprocal — both sides pay if they lose, both collect if they win
- Cap recoverable attorney fees at a reasonable amount
- Require mandatory mediation before either party can pursue fees in litigation
- Exclude attorney fees from small claims disputes under a defined threshold
How to Negotiate This Clause
Push to eliminate the attorney fees clause entirely — each party bears their own costs. If the landlord insists on a mutual provision, cap fees at $25,000 regardless of actual costs incurred, and add language that fees cannot be awarded where the losing party's position had a 'reasonable legal basis.' Never accept a one-way provision that requires you to pay the landlord's fees regardless of outcome.
- Make attorney fees reciprocal — both sides pay if they lose, both collect if they win
- Cap recoverable attorney fees at a reasonable amount
- Require mandatory mediation before either party can pursue fees in litigation
- Exclude attorney fees from small claims disputes under a defined threshold
Example Language: Bad vs. Better
Landlord-Friendly (Risky)
"In any action to enforce this Lease, Tenant shall pay all costs and expenses, including reasonable attorney fees, incurred by Landlord in connection with such action."
Tenant-Friendly (Better)
"In any action arising out of this Lease, the prevailing party shall be entitled to recover its reasonable attorney fees and costs from the non-prevailing party."
Frequently Asked Questions
- What is an attorney fees clause in a lease?
- An attorney fees clause specifies who pays legal costs if the landlord and tenant end up in a dispute. One-sided clauses only allow the landlord to collect fees; mutual clauses give both sides fee recovery rights.
- Should attorney fees be mutual in a lease?
- Yes, ideally. Mutual attorney fees clauses incentivize both parties to only litigate meritorious claims, since both sides risk paying the other's fees. One-sided clauses encourage landlords to litigate aggressively.
- Can attorney fees exceed the original dispute amount?
- Absolutely, and this is common. A $5,000 security deposit dispute can generate $20,000 in attorney fees. One-sided fee clauses can make even valid tenant claims economically unviable to pursue.
- Do all states allow one-sided attorney fees clauses?
- Some states like California have laws converting one-sided attorney fee provisions into mutual provisions. Most states allow whatever the parties negotiate. Always check state law before assuming a one-sided clause will be enforced.
- What is the American Rule for attorney fees?
- The American Rule means each party pays their own attorney fees unless a contract or statute provides otherwise. Lease attorney fees clauses override the American Rule — which is why one-sided clauses are so harmful to tenants.