You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.

You can deduct legal expenses that are:

• Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business,
• For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or
• To collect taxable alimony.

If the attorney fees are not for one of the purposes (divorce, for example), the legal fees are not deductible.

In your case, it appears the question turns on whether the dispute could lead to the collection of taxable income.  If this is rental, trade or business, or investment property, the answer is yes, the legal fees are deductible.  If this is your home or other property not held as an investment or trade or business, then the answer is no.