Broad Attorney’s Fees Language in Form Lease Results in Appeals Ruling for Tenant

PHOTO BY: ANIBAL ORTIZ, ORANGE COUNTY REGISTER

Tony Liu, a business litigation and trial attorney here in Orange County, specializes in representing Chinese and Taiwanese businesses here in U.S.
PHOTO BY: ANIBAL ORTIZ, ORANGE COUNTY REGISTER

A contract clause allowing the winning party litigating a lease issue to be awarded attorney’s fees is not uncommon. If there is a lawsuit concerning a lease it will probably be the landlord suing to collect rent, which, if properly documented, the landlord should have a good chance of winning. However, if the clause is broadly worded, it may open up wide potential liability for the landlord. Hemphill v. Wright Family, LLC, is a case in point.

Don Hemphill purchased a mobile home at a mobile home park owned by Wright Family, LLC. Part of the purchase was a lease agreement covering the home site and common areas. An attorney fee provision in the lease allowed the prevailing party in any action arising out of the homeowner’s tenancy, the agreement, or the provisions of the state Mobilehome Residency Law to recover reasonable expenses including attorney fees and costs.

Hemphill was injured when he stepped into a sunken and uncovered drainage hole on the property and sued Wright Family in a personal injury claim. A jury found in his favor, awarding him $311,899.67. The trial court denied plaintiff’s attempts to be awarded attorney’s fees (normally not part of personal injury claims) under the lease and appealed.

The appellate court ruled that plaintiff’s fall while walking across a common area lawn arose out of the homeowner’s tenancy. This entitled him to an award of attorney fees as the prevailing party in the legal action. The appeals court reversed the lower court order denying a fee award and sent the matter back to the trial court to determine the attorney’s fees award.

The court found that “homeowner’s tenancy” was not defined in the lease and defendant didn’t offer a definition. The agreement was a form, with blanks to be filled in, and the court stated the ambiguities in the contract would be interpreted against the party creating the ambiguity (the defendant). The lease stated defendant would maintain all physical improvements, including common area lawns, in good working order and condition (which it apparently was not).

The defendant fell victim to its own lease (which was very broad, vague and was a form contract) in addition to not maintaining the common area in a safe condition. If you’re a landlord, you may be able to avoid the same fate as Wright Family, LLC, by using more precise, specific language in a contract created for a particular tenant (and by keeping up the property).

Whether you’re a landlord or tenant in a commercial or industrial property, if you have questions or concerns about a lease or possible breaches of it, contact my office so we can talk about the agreement, your situation and the applicable laws.