Second Department Awards Foreclosure Defendant Legal “Fees on Fees” Pursuant to RPL 282(1)

By: Jonathan Freiberger

As discussed in a prior BLOG article “Pursuant to RPL 282(1), Attorney’s Fees are Available to Borrowers in Mortgage Foreclosure Actions if They Know How to Ask for Them,” potential clients, when consulting about a new litigation matter, always ask “can we recoup our legal fees in the litigation.” We explain that, according to the “American Rule,” “the prevailing litigant is ordinarily not entitled to collect a reasonable attorney fee from the loser.” Alyeska Pipeline Services Co. v. Wilderness Society, 421 U.S. 240, 247 (1975) (providing a historical perspective on the awarding of attorneys’ fees in Federal Court litigation); see also Mighty Midgets, Inc. v. Centennial Ins. Co., 47 N.Y.2d 12, 21-22 (1979). The “American Rule” “reflects a fundamental legislative policy decision that, save for particular exceptions or when parties have entered into a special agreement, it is undesirable to discourage submission of grievances to judicial determination and that, in providing freer and more equal access to the courts, the present system promotes democratic and libertarian principles.” Mighty Midgets, 47 N.Y.2d at 22 (citations omitted).

Exceptions to the “American Rule” exist, for example, where the recovery of attorney’s fees “is authorized by agreement between the parties, statute or court rule.” Hooper Assoc., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487 (1989) (citations omitted); Premium Productions, Inc. v. O’Malley, 246 A.D.3d 948, 955 (2d Dept. 2026); Giannakopoulos v. Figame Realty Mgt., 219 A.D.3d 803, 805-06 (2d Dept. 2023).

Further, “[i]n general, only a prevailing party is entitled to recover an attorney's fee and to be considered a prevailing party, a party must be successful with respect to the central relief sought.” Village of Hempstead v. Taliercio, 8 A.D.3d 476 (2d Dept. 2004) (citations, internal quotation marks and brackets omitted); see also YC MD, P.C. v. Shusterman, 229 A.D.3d 708, 709 (2d Dept. 2024). “Such a determination requires an initial consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope.” DKR Mortgage Asset Trust 1 v. Rivera, 130 A.D.3d 774 (2d Dept. 2015) (citations and brackets omitted); see also YC MD, P.C., 229 A.D.3d at 709.

Frequently, mortgages provide that if the lender commences litigation to foreclose, it is entitled to recover its reasonable legal fees and expenses. As typically written, such provisions are unilateral and, therefore, under the express terms of the mortgage, a borrower that successfully defends a mortgage foreclosure action would not be entitled to recover legal fees and expenses. However, Real Property Law § 282(1), which resolves this imbalance, “reads into” mortgages a reciprocal attorney’s fees provision when the existing attorney’s fees provision is one-sided.

RPL 282(1), by its express terms, makes plain that for a borrower to benefit from this provision, an affirmative claim for such fees must be made either by commencing an action or by asserting a claim for such fees by way of counterclaim. See, e.g., U.S. Bank N.A. v. Onuoha, 216 A.D.3d 1069, 1073 (2d Dept. 2023) (denying fees where no claim was made); Nationstar Mortgage, LLC v. Dorsin, 180 A.D.3d 1054, 1055 and 1057 (2d Dept. 2020) (awarding fees where a claim was made).

Against this backdrop, we discuss 21st Mort. Corp. v. Nweke, a mortgage foreclosure action decided by the Appellate Division, Second Department, on August 5, 2026. In 2014, lender commenced an action to foreclose a mortgage. Lender’s motion for summary judgment was denied and borrower’s cross-motion for summary judgment dismissing the action as time-barred and for attorney’s fees pursuant to RPL 282 was granted. The motion court, however, sua sponte, imposed an equitable mortgage in favor of the lender.

On the borrower’s appeal, the Second Department reversed to the extent that the motion court awarded the lender an equitable mortgage. The Court granted those branches of the borrower’s cross motion dismissing the foreclosure action as time-barred and awarding legal fees pursuant to RPL 282 and remitted the matter to the motion court to determine the amount of fees and expenses to be awarded to the borrower. Upon remittitur, the motion court confirmed the appointed referee’s report over the lender’s objections and awarded the borrower $100,000 in fees and expenses. This time the lender appealed and the Second Department affirmed.

The Court’s decision focused on the award of “fees on fees” – that portion of the “legal fees and costs incurred by the [borrower] in prosecuting her claim for an award of attorney’s fees.” An award of such fees “generally must be based upon a specific contractual provision or statute. In this regard, “[w]here a contract provides for indemnification for ‘legal costs and charges, including counsel fees’, this Court has determined that such provision did not provide for ‘fees on fees’ in the absence of unmistakably clear intent regarding their recovery.” (Citations and some internal quotation marks omitted.)

However, the Second Department noted that in conjunction with RPL 234, it and the Court of Appeals “have authorized the inclusion of fees for prosecuting or defending an appeal dealing with attorneys’ fees.[1] In so doing, the Court noted that RPL 234, was designed to “level the playing field between landlords and residential tenants, creating a mutual obligation that provides an incentive to resolve disputes quickly and without undue expense. The statute thus grants to the tenant the same benefit the lease imposes in favor of the landlord” and that RPL 282 had a similar purpose.

Here, the note and mortgage provide:

that in the event of a default, the note holder would have the right to be paid back in full “for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law” and those expenses included attorneys’ fees. The mortgage further provided that “[i]n any lawsuit for Foreclosure and Sale, Lender will have the right to collect all costs and disbursements and additional allowances allowed by law and will have the right to add all reasonable attorneys’ fees to the amount Borrower owes.” [Internal brackets omitted; emphasis added.]

The lender in 21^st Mortgage took the position that it was not entitled to “fees on fees” and, therefore, neither was the borrower. The Court disagreed and noted that in Gertler v. Davidoff Hutcher & Citron LLP, 233 A.D.3d 846 (2d Dept. 2024), it awarded “fees on fees” pursuant to a statute (Labor Law § 198[1-a]) that used “all reasonable attorney’s fees” language (emphasis added). Here, the Court, noting that the operative note and mortgage use the word “all” too, stated:

Real Property Law § 282 does not use the term “all,” and neither does Real Property Law § 234. However, the legislative intent—as was recognized by the [lender]—was to impose reciprocal obligations upon lenders and landlords. To hold otherwise would give the lender an undue advantage by permitting it to litigate the issue of attorneys’ fees with impunity, and frustrate the legislative purpose. In the instant case, since the [lender] may recover, like the plaintiff in Gertler, “all” reasonable attorneys’ fees, including “fees on fees,” the [borrower] may recover “fees on fees.” The evidence submitted by the [borrower] was sufficient to establish the reasonableness of the requested fees. [Citations and internal quotation marks omitted  

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

[1] The cases to which the Court was referring involved claims for legal fees in landlord/tenant summary proceedings under RPL 234. RPL 234, like RPL 282, implies a reciprocal legal fee provision in residential leases entitling a prevailing tenant to recoup legal fees in summary proceedings where the lease, as written, only permits the recovery of legal fees by the landlord.