Equitable Denial of Contractual/Statutory Attorney’s Fees in Eviction Cases Where Landlord Habitability Failures and a Mixed Result Make Fee-Shifting Unwarranted

Introduction

In CMRT Holdings, LLC v. Courtney Butler a/k/a Courtney Lane and Jason Hunt (Vt. Sup. Ct., July 10, 2026), a landlord appealed only one issue from an eviction-related damages proceeding: the trial court’s refusal to award the landlord attorney’s fees. The landlord relied on (1) an attorney-fee clause in the lease and (2) statutory fee-shifting under 9 V.S.A. § 4456(e), which authorizes a landlord to recover “damages, costs, and reasonable attorney’s fees” if a tenant violates specified duties not to damage the premises.

The tenants—self-represented at the bench trial—raised habitability defenses. The evidentiary record included serious, code-related habitability deficiencies identified by the State Fire Marshal (including structural subfloor issues tied to an unaddressed leak), some of which had been reported months earlier and remained unresolved.

The core question on appeal was not whether the landlord proved any lease breach (it did), but whether a fee clause and a fee-shifting statute compelled a fee award even where the merits outcome was “mixed” and the landlord’s own habitability failures were substantial.

Summary of the Opinion

The Vermont Supreme Court affirmed the denial of attorney’s fees. Although the tenants failed to pay rent for two months and violated the no-smoking provision (and the landlord recovered limited damages and costs), the trial court acted within its authority to deny fees given the “mixed nature” of the case and counterevidence—especially the “egregious unaddressed habitability issues.”

The Court emphasized that attorney’s fees in Vermont are generally governed by the American Rule (each side pays its own fees unless a contract or statute provides otherwise), but it treated entitlement under a fee provision as not necessarily automatic in a case where equitable considerations and the overall result make fee-shifting inappropriate.

Analysis

Precedents Cited

  • Sweet v. St. Pierre, 2018 VT 122

    The Court invoked Sweet for the baseline principle that Vermont follows the “American Rule,” meaning attorney’s fees are not recoverable unless authorized by contract or statute. In this case, that framing matters because it sets up the landlord’s argument: there was a contract clause and a statute, so fees should follow. The Court then distinguished between the existence of a fee authorization and whether the trial court must award fees in the circumstances presented.

  • Villeneuve v. Beane, 2007 VT 75, 182 Vt. 575 (mem.)

    Villeneuve is the decision’s central analog. There, even though a lease clause and 9 V.S.A. § 4456(e) would “ordinarily” entitle the landlord to attorney’s fees, the trial court denied fees due to the landlord’s repeated breach of the implied covenant of good faith and fair dealing and because both sides had meaningful victories after protracted litigation. The Supreme Court approved that pragmatic and equitable approach, noting that awarding fees to both sides would likely be a “wash.”

    In CMRT Holdings, the Court applied the same principle—fees need not be awarded simply because a fee clause or fee statute exists when the overall outcome and equities (here, serious habitability failures) make a fee award unjustified.

  • Hilder v. St. Peter, 144 Vt. 150 (1984)

    Hilder supplies the substantive habitability framework: Vermont recognizes an implied warranty in residential leases that the landlord will maintain premises “safe, clean and fit for human habitation,” and a substantial housing code violation is prima facie evidence of breach. The Court used Hilder to underscore that habitability is not a minor, technical concern—serious, unremedied code issues are a legally significant landlord failure that can bear on remedies and equitable outcomes, including whether fee-shifting is appropriate.

Legal Reasoning

The Court’s reasoning proceeds in three steps:

  1. Fee authority existed, but the case posture mattered.

    The lease clause broadly allowed the landlord to recover “reasonable attorney’s fees” if the tenant violated the lease, if the landlord had to defend tenant claims, or if the tenant failed to vacate after termination notice. Separately, 9 V.S.A. § 4456(e) authorizes fees when a tenant violates specified statutory duties (including not negligently damaging the premises under § 4456(c)). The Court accepted that these provisions would “ordinarily” support a fee award in a straightforward landlord-win case.

  2. The outcome was “mixed,” reducing the case for fee-shifting.

    The landlord prevailed on some claims (unpaid rent after crediting the security deposit; limited damages for remediation work related to smoking and minor damage), but it recovered far less than sought, and the factfinder credited tenant counterevidence on several contested points. The trial court characterized the verdict as mixed and used that as a reason to deny fees.

    By affirming, the Supreme Court effectively treated fee-shifting as sensitive to the overall litigation result—especially in landlord-tenant disputes where both parties may have partially meritorious positions.

  3. Serious, unaddressed habitability defects supported denying fees as an equitable matter.

    The Court placed notable weight on the “egregious unaddressed habitability issues” documented by the State Fire Marshal, including structural subfloor problems tied to a leak not repaired “in a timely way,” and other code-related deficiencies that lingered for months. The Court emphasized that the tenants had raised concerns in fall 2024, that months elapsed without resolution, and that the unit required Fire Marshal approval before it could be rented again.

    While the opinion did not re-litigate habitability liability in the form of damages or rent abatement, it treated habitability failings as a compelling contextual fact: fee-shifting to the landlord would be difficult to justify where the landlord’s own noncompliance with 9 V.S.A. § 4457(a) (implied promise of habitability and code compliance) was substantial and materially relevant to the dispute.

Impact

Although the decision is issued as an “ENTRY ORDER” and notes that three-justice panel decisions are “not to be considered as precedent,” its reasoning may still be persuasive for trial courts and litigants. Practically, it signals several important points for Vermont landlord-tenant litigation:

  • Fee clauses and § 4456(e) are not necessarily automatic in practice.
    Courts may treat fee-shifting as discretionary or at least equity-sensitive where the litigation result is mixed or where awarding fees would conflict with fairness given the full context.
  • Habitability failures can influence remedies beyond direct habitability damages.
    Even where a landlord proves tenant breaches (nonpayment, smoking, minor damage), serious landlord noncompliance with habitability duties can affect whether the landlord receives “extra” litigation remedies like attorney’s fees.
  • Litigation strategy and record-building change.
    Landlords seeking fees should be prepared to show not only tenant breach but also that the landlord acted diligently on repair obligations and code compliance. Tenants resisting fees may focus on creating a record of habitability complaints, notice, inspection reports, and the landlord’s response timeline.
  • Encourages early resolution where both sides have exposure.
    If fees can be denied in “mixed” cases, parties may have stronger incentives to settle rather than assume a fee clause will fund a full litigation campaign.

Complex Concepts Simplified

  • American Rule: Each side pays its own lawyer unless a statute or contract shifts fees.
  • Fee-shifting clause: A lease term that makes the losing (or breaching) party pay the other side’s attorney’s fees. Even where such a clause exists, courts may consider fairness and the overall result when deciding whether and how much to award.
  • 9 V.S.A. § 4456(e): A Vermont statute that can allow a landlord to recover attorney’s fees if the tenant violates certain duties (e.g., negligently damaging the premises).
  • Implied warranty of habitability / 9 V.S.A. § 4457(a): The law treats every residential lease as including a promise by the landlord that the unit will remain safe, clean, fit to live in, and code-compliant. Serious code violations can be strong evidence of breach.
  • “Mixed” verdict: A result where each side wins something (or where the prevailing party wins far less than sought), making it harder to justify shifting all fees to one side.

Conclusion

CMRT Holdings, LLC v. Courtney Butler a/k/a Courtney Lane and Jason Hunt affirms that, in Vermont landlord-tenant disputes, a court may deny attorney’s fees even when a lease fee clause and 9 V.S.A. § 4456(e) could support a fee award—particularly where the outcome is mixed and the record shows serious, unremedied habitability defects implicating 9 V.S.A. § 4457(a) and the principles recognized in Hilder v. St. Peter. The decision’s broader significance is its emphasis on context and equity: fee-shifting is not treated as a mechanical add-on to partial landlord success when the landlord’s own statutory duties to provide habitable housing have been substantially neglected.