Colorado’s second-highest court revived a proposed class-action lawsuit against landlords and other entities last month, concluding that state law did not permit the practice of demanding that tenants pay attorney fees in certain eviction proceedings.

In 2021, lawmakers enacted a process by which tenants facing eviction can “cure” their delinquent payments. After a landlord has provided notice of nonpayment and after they file an eviction case, the tenant may pay “all amounts due according to the notice, as well as any rent that remains due” up until there is a final court judgment. If that happens, the judge must dismiss the case.

But could “all amounts due” include a demand that the tenant their landlord’s attorney fees for bringing the eviction case?

No, concluded a three-judge Court of Appeals panel, because Colorado prohibits the shifting of fees in only one direction.

“The fees provision requires a tenant to pay her landlord’s attorney fees as a condition of exercising the statutory right to cure once an (eviction) action is filed — it does not contemplate a situation in which the tenant’s fees could be shifted to the landlord if the default is cured before the court enters an order,” wrote Judge Matthew D. Grove in the May 28 opinion.

In 2023, seven plaintiffs filed suit alleging a similar sequence of events. They signed a lease obligating them to pay “our current attorney’s fees and court costs” if they opted to cure their nonpayment before the conclusion of an eviction case. They all fell behind on rent, cured their nonpayment, and faced a demand for their landlords’ attorney fees, usually between $300 and $500.

The plaintiffs sued Cornerstone Apartment Services, RedPeak Properties, Echelon Property Group, and Asset Living. They also named as defendants the Colorado Apartment Association and the law firm known at the time as Tschetter Sulzer, which advertised itself as “Colorado’s #1 Eviction Law Firm.”

Among other things, the plaintiffs pointed to a provision of state law prohibiting leases from containing a “one-way, fee-shifting clause that awards attorney fees and court costs only to one party.” A related law prohibits either landlords or tenants from recovering their costs of an eviction case unless the lease agreement allows “for either party to obtain attorney fees.”

In a series of 2024 orders, Denver District Court Judge Sarah B. Wallace dismissed the plaintiffs’ theft, deceptive trade practices, and related claims. She noted that, during the 2023 legislative session, lawmakers revised the law to specify that any rental agreement with an attorney fees provision is only valid for a “prevailing party in a court dispute” after a judge determines who the prevailing party is.

The question in the class-action lawsuit, Wallace wrote, was whether Colorado law between 2021 and 2023 prohibited the defendants from requiring tenants to pay the landlord’s attorney fees in an eviction case after they cured their nonpayment.

“Plaintiffs argue, without citation to any case law, that the law in Colorado is that a litigant in Colorado can never collect fees from an opponent unless it has secured a court order awarding fees and costs. Under the facts of this case, the relevant lease provisions permit the Defendants to collect attorneys’ fees incurred when filing an (eviction) action,” she concluded.

After the plaintiffs asked her to reconsider, Wallace declined.

Under the plaintiffs’ view, “a tenant could regularly (even monthly) fail to pay their rent such that a landlord would have to file (an eviction), and so long as the tenant exercised their right to cure, the landlord would have no ability to ever collect” the filing costs from the tenant, she wrote. “This reading of the statute is non-sensical. If the legislature’s intent was to prevent landlords from assessing attorneys’ fees and court costs against a tenant in every instance, it would have stated so clearly.”

The plaintiffs appealed to the Court of Appeals, arguing that the demand for landlord attorney fees violated the state’s public policy.

“Many tenants who miss a rent payment can, if given a couple weeks, gather enough money to cure, yet cannot come up with another $300-$500 for Fees — a significant percentage of a month’s rent,” wrote the plaintiffs’ attorneys. “And if they can, it may well affect their ability to make their next rent payment, thus subjecting them to another eviction action.”

Tschetter Sulzer acknowledged that state legislators had since clarified the law to specify the conditions for recovering fees.

“Before the statute was amended, however, it did not bar landlords from being reimbursed for their fees and costs when a default was cured without trial or judgment, so that the challenged practice was neither ‘illegal’ nor ‘fraudulent,’” the firm’s attorneys wrote.

The Court of Appeals panel disagreed.

“Contrary to the district court’s understanding of the statute, we conclude that the fees provision is precisely what (the law) prohibits,” wrote Grove. “It flatly prohibits a lease from including a ‘one-way, fee-shifting clause’.”

He acknowledged Wallace’s concerns about the costs landlords incur in paying attorneys to draft and file eviction complaints. Yet, tenants may also need to pay fees if they consult an attorney.

“Nonetheless, neither the district court in its order nor the defendants on appeal offer any cogent reason why such fees incurred by the tenant would not be ‘shiftable,’” Grove wrote.

The panel returned the case to Wallace to address the defendants’ other arguments.

The case is Woodruff et al. v. Tschetter Sulzer, P.C. et al.