Addressing a particular contractual attorney fee issue for the first time, the Appellate Division, First Department has deemed unenforceable a real estate company’s lease provision directing the lessee to pay its attorney fees even when the legal action was based on the company’s default.

A unanimous First Department panel wrote in its decision that “an attorneys’ fees provision which provides that the tenant must pay attorneys’ fees if it commences an action against the landlord based upon the default of the landlord is unconscionable and unenforceable as a penalty.”