What This Liability Means

An attorney fee shifting clause requires the losing party in a lease dispute to pay the prevailing party's attorney fees. In commercial leases, these are often drafted one-sidedly to benefit the landlord — the tenant pays landlord fees if they lose, but the landlord doesn't pay tenant fees.

Dollar Example: Landlord sues for $60,000 in unpaid rent and wins, with $25,000 in attorney fees

Real Dollar Example

ScenarioLandlord sues for $60,000 in unpaid rent and wins, with $25,000 in attorney fees
Exposure$85,000 total liability

$60,000 judgment + $25,000 attorney fees = $85,000. The fee clause increased total exposure by 42%.

Worst Case Scenario

Complex lease disputes in commercial courts can generate $50,000-$150,000 in attorney fees on each side. A one-sided fee clause means your losing position creates catastrophic additional liability beyond the underlying dispute.

Warning Signs in Your Lease

  • 'Tenant shall pay all costs and attorney fees incurred by Landlord' — one-sided
  • No reciprocal right for tenant to recover fees if they prevail

How to Limit This Liability

  • Make the fee clause bilateral: both parties can recover fees if they prevail
  • Add a minimum threshold: fee shifting only applies to claims over $25,000

Frequently Asked Questions

What is a bilateral attorney fee clause?
A clause where both parties can recover fees if they prevail. This is the tenant-favorable approach — it deters frivolous landlord claims because the landlord risks paying tenant fees if they lose.
Can I negotiate a one-sided attorney fee clause?
Yes. Push to make it bilateral or remove it entirely. Some landlords agree to bilateral fee shifting because they plan to win any dispute anyway — but bilateral clauses often reduce overall litigation because both sides have more skin in the game.
Are attorney fees dischargeable in bankruptcy?
Attorney fee obligations arising from lease breach are typically treated as general unsecured claims in bankruptcy — dischargeable in Chapter 7, payable over time in Chapter 13. But bankruptcy itself creates attorney fees and credit damage.
How do attorney fee clauses affect settlement negotiations?
Significantly. When one party faces mounting attorney fees under a one-sided clause, they become more motivated to settle. A landlord who knows the tenant will have to pay their fees has less incentive to settle reasonably.
What is a 'prevailing party' in lease litigation?
Courts determine the prevailing party based on overall success. If the landlord claimed $100,000 and recovered $60,000, they may be the prevailing party. If both sides win on some issues, the court may allocate fees proportionally.