“To be or not to be, that is the question.” - William Shakespeare

This famous quote by Shakespeare in Hamlet is the opening phrase given by Hamlet in the famous play Hamlet, where the prince contemplates whether death outweighs the hardships of life. While attorneys may contemplate whether death is a better alternative to practicing law, when drafting contracts in Georgia, attorneys must also contemplate the enforceability of attorney fees in commercial leases. In this article, we will briefly explore the age-old issue in drafting commercial leases and whether attorney fees or no attorney fees may be recouped against a breaching party.

In Georgia, there are no statutory prohibitions precluding attorney fee award provisions in a contract to be imposed against the breaching party. Nonetheless, attorney fee awards for notes and other evidence of indebtedness are governed by Georgia statute, and Georgia courts have generally defined leases to be considered evidence of indebtedness failing under Georgia statute; however, only rental payments and other fee obligations in a lease are considered evidence of indebtedness and other breaches of a lease, such as failure to maintain and repair the premises, are not subject to Georgia statute.

Attorney fees limited by Georgia statute for notes and evidence of indebtedness:

The Georgia statute provides that “[o]bligations to pay attorney’s fees upon any note or other evidence of indebtedness, in addition to the rate of interest specified therein, shall be valid and enforceable and collectable as a part of such debt if such note or other evidence of indebtedness is collected by or through an attorney after maturity.” This obligation is limited to by the following stipulations:

1. Such provision and obligation shall be valid and enforceable up to but not in excess of fifteen percent of the principal and interest owing on said note or other evidence of indebtedness.
2. If such note or other evidence of indebtedness provides for the payment of reasonable attorney’s fees without specifying any specific percent, such provision shall be construed to mean fifteen percent of the first $500.00 of principal and interest owing and ten percent of the amount of principal and interest owing thereon in excess of $500.00.
3. After maturity, if the holder shall notify the maker providing for a ten-day cure period that the provisions relative to payment of attorney’s fees in addition to the principal and interest shall be enforced. If the principal and interest is paid in full before the expiration of such time, then the obligation to pay the attorney’s fees shall be void and no court shall enforce the agreement.
4. If, in a civil action, the award of attorney’s fees is in an amount greater than $20,000.00, the party required to pay such fees may petition the court seeking a determination as to the reasonableness of such attorney’s fees.

The Georgia courts have routinely provided that the intent of Georgia statute is that the term “evidence of indebtedness” includes all written leases which impose on the lessee an obligation to pay money, whether commercial, non-commercial, or residential, and the payment of attorney fees in a lease must be construed in light of the Georgia statute. When applying the statute, attorney fees may be excessive where the amount claimed is in excess of the formula set under the Georgia statute and highlighted above. While it is clear that a lease is evidence of indebtedness in regard to the payment of rent and other fees, the Georgia statutory limitations set forth above are not applicable to all claims for attorney fees based on a lease provision (i.e., maintenance and repair obligations, damages to property, etc.).

In summary, an attorney fee provision in a lease must be drafted taking into consideration of the Georgia statute and landlords should be aware of the statutory requirements that must be met when such attorney fees are related to indebtedness. However, do not fret, as attorney fees unrelated to indebtedness seem to be safe from statutory prohibitions and can be broadly drafted, for now. As for the age-old question, the answer is always to include “attorney fees” when drafting a lease.