DD 1/11/07 Landlord's Right to Review Tenant's Construction Can Lead to Tort Liability to Third Party Plaintiffs

Daily Development for Thursday, January 12, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

LANDLORD/TENANT; LANDLORD'S LIABILITY FOR INJURY TO TENANT EMPLOYEES:  Even though a lease may include a landlord's disclaimers as to responsibility for its tenant's construction and design work, such provisions will not relieve a landlord from its duty to assure that its review of its tenant's construction plans adheres to the principles of safety.

Geringer v. Hartz Mountain Development Corporation, 388 N.J. Super. 392, 908 A.2d 837 (App. Div. 2006); October 24, 2006.

A landlord leased the entire floor of a building. The lease stated that the tenant was responsible for maintaining the premises, and for completing all repairs arising out of alterations the tenant made to the property.  The tenant modified the property by elevating a portion of the floor, and by adding a staircase to reach the newly elevated portion.  It hired its own architect and contractor to design and construct the stairway, and the landlord, pursuant to its reserved right under the lease,  approved the  plans.

An employee of the tenant fell on the stairs and was seriously injured.  She filed a personal injury action against the landlord, claiming that as the property's owner and lessor, it had been negligent in the design, construction, maintenance, and repair of the stairway.  The lower court granted summary judgment in favor of the landlord.

The employee appealed from the lower court's decision, and the Appellate Division affirmed in part and reversed in part.  It affirmed the determination that based on the terms of the lease, the landlord did not owe a duty to the employee with respect to the maintenance and repair of the stairway.  It reversed the determination that the landlord did not owe a duty to the employee with respect to the stairway's design and construction.

The Court began its discussion by explaining that whether or not a landlord owes a duty to someone injured on its property is based on a consideration of the relationship of the parties, the nature of the attendant risk, the landlord's opportunity and ability to exercise reasonable care, and the public interest in the proposed solution.  The Court found that after viewing the lease, it was clear that the landlord did not have a duty to maintain or repair the stairway, as those responsibilities were allocated to the tenant.  It cited precedent holding  that a landlord is not liable for personal injuries suffered by a commercial tenant's employee on the leased property due to the lack of maintenance or repair, when the terms of the lease place the responsibility for maintenance and repair on the tenant.  Considering the tenant's complete use of the property and the roles of the parties with respect to repairs and maintenance expressed in the lease, the Court found no public interest

 reason to impose a duty on the landlord to ensure that its tenant fulfilled its obligation to maintain the stairway.  It also found that the attendant risk did not warrant imposing the duty.

With regard to the stairway's design and construction, however, the Court found that the landlord was substantially involved, and therefore was potentially liable for injuries caused by the same.  It found that the lease provided for the landlord's substantial role in the design and construction of alterations to the space.  The alterations could not have proceeded without the landlord's approval of the plans, and the landlord encouraged the tenant to use its in-house subcontractors.  Therefore, the Court found that the landlord had an essential role in designing and constructing the staircase.  It further found that while the lease included attempted disclaimers as to responsibility for construction and design work, such would not relieve the landlord from its duty to assure that its review of the construction plans adhered to the principles of safety.  Therefore, the Court remanded the case for trial as to whether the landlord breached its design and construction duties and caus

ed the employee's injuries.

Comment 1: Although the court discussed the landlord’s pushing the tenant to use the landlord’s subcontractors, the editor, having studied the case, does not conclude that this fact was essential to the court’s finding of a duty here.  The court was simply emphasizing that the landlord in fact actively and extensively exercised its right to review the proposed construction. 

An inference might be drawn that if a lease provides for a duty on the part of a landlord to review and inspect proposed tenant improvements, and the landlord fails to do so at all, it is not, in fact, “extensively involved” in an alleged negligent construction, and might not have liability.  The editor is not completely comfortable that this is an appropriate inference.  The court first discussed the provisions in the lease giving the landlord the right of inspection, and then the fact that the landlord took full advantage of those rights.  It is unclear whether the mere right, without the follow up, would be free of any duty.  Where the landlord has no other reason to believe that the tenant will do something dangerous to the public, it may not be unreasonable to dismiss with a plan review and thus to avoid liability when the plans prove faulty.  Otherwise, any time a landlord reserves a right to inspect or review something, it would have potential liability even it does not exe

rcise that right if the "something" is done badly.  Shades of Fleet Factors.

Comment 2: The case is a useful cautionary tale.  Although a party might not have a duty to perform certain actions, if it elects to perform them anyway, the party will be liable for its negligence.

Comment 3: Of course, here the landlord was somewhere between a rock and a hard place.  Clearly it had an interest in reviewing and approving permanent improvements to its building.  Therefore, it necessarily had to undertake a review of proposed plans.  Thus, as a practical matter, it could hardly avoid the public responsibility to review these plans carefully. 

Comment 4: In any event, the editor concurs that a party to a lease may not disclaim liability to third parties.  One can seek indemnification, of course, from the other side of the lease (assuming that public policy concerns about waiver of  negligence do not arise), but the lease should not permit a negligent party from avoiding its duty of care to prospective third party victims of its negligence.

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