Glenn A. Cline and Emily J. Alt
Ballard Spahr Andrews & Ingersoll, LLP
For years, real estate lawyers drafted provisions in commercial leases entitling landlords to recover their attorneys’ fees in lawsuits for repossession of the rented property due to the tenants’ failure to pay rent. And in most cases, District Courts in Maryland honored those provisions, granting money judgments against commercial tenants which included the reasonable amount of attorneys’ fees incurred by the landlords.
However, the landscape changed in 2006, when the Court of Special Appeals, in Law Offices of Taiwo Agbaje, P.C. v. JLH Properties, II, LLC, 169 Md. App. 355 (2006), held that attorneys’ fees were not recoverable in an action for repossession due to the tenant’s failure to pay rent under §8-401 of the Real Property Article (also known as the summary ejectment statute). The Court ruled that although §8-401 authorizes District Courts to award a money judgment in favor of a landlord for past-due “rent,”1 attorneys’ fees were not recoverable—even if attorneys’ fees were expressly defined in the lease as “additional rent”. It reasoned that attorneys’ fees could not constitute “rent” within the ambit of §8-401 because attorneys’ fees do not relate to the use or enjoyment of the property. Id. at 368-70.
In support of its decision, the Court also noted that attorneys’ fees must be proven “with the certainty and under the standards ordinarily applicable for proof of contractual damages.” Id. at 370. The Court noted that proof of the reasonableness of attorneys’ fees typically requires a “specific and detailed accounting of the services actually performed.” Id. In the view of the Court, this “complex factual inquiry” was inconsistent with the expedited nature of the summary ejectment statute. Id.
The Court’s decision left a commercial landlord unable to obtain in one proceeding all of the relief to which it was contractually entitled. Rather, a landlord was required to first file an action for repossession under §8-401, in which it could obtain a judgment for possession of the property and a judgment for the past-due rent owed by the tenant. Then, the landlord was forced to file an additional lawsuit to obtain a judgment for the attorneys’ fees expended in the earlier repossession action. Practically speaking, the result was an increase in litigation in the District Courts and an unnecessary increase in attorneys’ fees incurred.
In 2007, the General Assembly revised §8-401 to correct this problem. The General Assembly added the following language to §8-401 to explicitly permit the Courts to award attorneys’ fees to commercial landlords:
In the case of a nonresidential tenancy, if the court finds that there was such service of process or submission to the jurisdiction of the court as would support a judgment in contract or tort, the court may also give judgment in favor of the landlord for:
1. The amount of rent and late fees determined to be due;
2. Costs of the suit; and
3. Reasonable attorney’s fees, if the lease agreement authorizes the landlord to recover attorney’s fees.
MD CODE ANN., REAL PROP. § 8-401©(2)(v) (2007 Supp.). As a result, District Courts are once again permitted (but not required) to grant a money judgment in favor of a commercial landlord for attorneys’ fees in a summary ejectment case under §8-401, provided that the lease agreement authorizes the recovery of such fees.
In drafting commercial lease agreements on behalf of a landlord client, practitioners should always include language authorizing the recovery of attorneys’ fees, such as the following:
In the event that Landlord has to pursue any of its rights or remedies under this Lease, Landlord shall be entitled to recover from Tenant all reasonable costs incurred by Landlord in the pursuit of such rights or remedies, including reasonable attorneys’ fees, which shall not be less than fifteen percent (15%) of all such sums owing by Tenant to Landlord.
The above provision represents an attempt to incorporate a reasonableness standard into the lease agreement itself. It remains to be seen whether the District Courts will accept this type of provision as a consent by the tenant to the reasonableness of the requested attorneys’ fees. Instead, District Courts could require additional proof of reasonableness, which could frustrate the expedited nature of the summary ejectment proceedings. However, it is clear that the District Courts are once again vested with the authority to award judgments which include attorneys’ fees in summary ejectment actions.
1. A District Court may grant a money judgment against a tenant only if the landlord obtains personal service on the tenant. Otherwise, the landlord is entitled only to judgment for repossession of the property.