A tenant is entitled to recover attorney's fees only after successfully defending against a landlord's action arising out of the lease, according to the First Department, in Jerulee Co. v. Sanchez, which was decided on August 16, 2007. Importantly for practitioners, the court clarified exactly what "arising out of the lease" means.

"[T]he action was not one to enforce a covenant or obligation of the lease or due to a violation of the lease; rather, it was to rescind the lease due to fraud and mutual mistake. Although the ultimate relief sought was a warrant of eviction, it is not the ultimate relief that determines whether or not a dispute arises out of the lease within the meaning of § 234, as the tenant contends. Rather, it is determined by whether the litigation is based upon a breach of the terms of the lease."