The Case that May Have Lasting Implications for Real Estate Transactions and Other Contract Disputes Beyond Leases
The Colorado Court of Appeals recently clarified the scope of contractual fee-shifting provisions in lease agreements in an opinion, which may have broader implications for businesses with lease agreements or other similar contracts, real estate transactions and contract litigation in Colorado.
In the opinion—1046 Munras Properties, L.P. v. Kabod Coffee, 2025COA71—the Colorado Court of Appeals addressed the novel question of whether a prevailing party can recover attorney’s fees incurred enforcing a fee-shifting provision under an agreement, which is often referred to as “fees on fees.” The decision marks the first published Colorado case to affirm the enforceability of these fees under contractual fee-shifting provisions. Until now, Colorado courts had not addressed whether these provisions cover the costs of litigating the fee entitlement itself. This decision confirms that they can—if the contract language is sufficiently broad.
The case arose from a lease dispute in which the tenant, Kabod Coffee, ceased operations in violation of a continuous use clause. The tenant temporarily ceased operations of its coffee shop, and the landlord sued for possession and damages, ultimately prevailing at the trial court level and securing a judgment of $157,058.59. However, the trial court reduced this award by 50% and denied the landlord’s recovery of fees on fees, prompting the landlord’s appeal. On review, the Court of Appeals reversed in part, holding that the lease and the guaranty’s broad fee-shifting language entitled the landlord to recover fees on fees, including attorney fees incurred in pursuing the appeal. Otherwise, according to the court, a party “would not be made whole if, at the conclusion of the litigation, it prevailed but nonetheless faced a legal bill for attorney fees and costs that it would not have incurred absent the breach.”
Because fee-shifting provisions are standard in commercial leases and increasingly common in purchase and sale agreements and other real estate contracts, this opinion has immediate implications for lease enforcement and broader relevance for real estate transactions generally.
- Purchase and Sale Agreements (PSAs): Many PSAs include provisions awarding attorney fees to the prevailing party in disputes over closing obligations, representations and warranties, or indemnification. Under Munras Properties, parties may now recover fees incurred in litigating the fee entitlement itself, provided that the PSA itself broadly supports such recovery.
- Loan Agreements and Financing Instruments: Loan documents often contain fee-shifting provisions allowing lenders to recover costs incurred in enforcing repayment obligations, protecting collateral or pursuing remedies upon default. Munras Properties indicates that fees on fees may be recoverable if the loan agreement includes language similar to that at issue in the decision, which covered “any action or proceeding … to enforce or interpret” the agreement (¶ 38). Further, guarantors may be jointly and severally liable for such fees if the guaranty includes such broad language. Lastly, appellate enforcement costs may also be recoverable, reducing the financial risk of pursuing remedies through litigation.
- Development and Joint Venture Agreements: Contracts governing entitlements, infrastructure obligations or cost-sharing may also benefit from broader fee recovery if drafted accordingly.
Given this decision, clients and counsel may want to revisit and reevaluate processes and form language, including:
- Drafting comprehensive fee-shifting clauses that explicitly cover enforcement actions and post-judgment proceedings, with specific reference to attorney fees entitlement; and
- Considering guarantor liability because the court reasoned that guarantors may be jointly and severally liable for all awarded fees and costs. Personal guarantees should mirror the underlying contract provisions to ensure full recovery from/protection of guarantors.
Finally, commercial litigants and their counsel will now need to evaluate potential litigation and litigation strategy with the understanding that enforcement costs may be fully recoverable, including appellate fees. Although the Munras decision may be altered or clarified in the future by subsequent appellate decisions, the potential recovery of fees on fees will impact future decision-making in filing and defending lawsuits and potential settlement strategy.
