💼 What Is an Attorney’s Fees Clause in Real Estate?

An Attorney’s Fees Clause in a real estate contract specifies who must pay attorney’s fees and legal costs if a dispute arises. It determines whether each party pays their own costs or whether the losing party must cover the winner’s fees in mediation, arbitration, or court.

How an Attorney’s Fees Clause Works

This clause outlines how legal costs will be handled if the buyer and seller enter a dispute involving the contract. It prevents surprises and helps discourage unnecessary or frivolous claims.

Common components of an Attorney’s Fees Clause include:

  • Fee-shifting rules — whether the losing party pays both sides’ legal costs.
  • Coverage scope — mediation, arbitration, litigation, or all dispute methods.
  • Limitations — maximum recoverable amounts or restrictions.
  • Cost allocation — who pays filing fees, arbitration costs, or court expenses.
  • Trigger events — what type of dispute activates fee obligations.

The purpose is to reduce conflict and give both parties clarity about their potential financial risks if a disagreement occurs.

Why an Attorney’s Fees Clause Matters

Benefits for Buyers:

  • Prevents unexpected legal expenses if a dispute occurs.
  • Discourages sellers from making unreasonable claims.
  • Clarifies responsibility for costs in mediation or arbitration.
  • Encourages faster, more cooperative dispute resolution.

Benefits for Sellers:

  • Reduces the risk of frivolous lawsuits from buyers.
  • Provides certainty about potential legal exposure.
  • Helps ensure fair treatment in dispute outcomes.
  • Makes contract enforcement more predictable and cost-efficient.

Example of an Attorney’s Fees Clause

A typical attorney’s fees clause might state:

  • “If either party initiates mediation, arbitration, or legal action regarding this contract, the prevailing party shall be entitled to recover reasonable attorney’s fees and costs.”
  • “In disputes resolved through mediation or arbitration, fees may be awarded at the arbitrator’s discretion.”
  • “Each party shall bear their own attorney’s fees unless otherwise required by state law.”

This example shows how the clause clearly assigns financial responsibility and discourages unnecessary disputes.

Why It Matters for FSBO Sellers

FSBO sellers often navigate contract disputes without full legal representation. An attorney’s fees clause helps protect them from unexpected costs and provides structure for resolving disagreements.

  • Reduces risk of costly disputes with buyers.
  • Clarifies who pays attorney fees in case of conflict.
  • Strengthens contract enforceability.
  • Discourages unnecessary legal challenges.

When listing with Flat Fee MLS through Brokerless, sellers can ensure their contracts include strong legal protections.

Frequently Asked Questions

Does the losing party always pay attorney’s fees?
Not always. Some clauses require each party to pay their own fees unless the dispute reaches arbitration or court.

Are attorney’s fees clauses enforceable?
Yes. Most states honor fee-shifting clauses as long as they are clearly written in the contract.

Does this clause apply to mediation?
Sometimes. The contract may state that parties split mediation costs but that attorney fees may be awarded later.

What types of disputes does this clause cover?
Common issues include earnest money disputes, missed deadlines, inspection disagreements, and contract performance.