There is no Daily Development for Monday, January 15, in recognition of Martin Luther King Day.
LANDLORD/TENANT; LANDLORD'S LIABILITY FOR DAMAGE TO THIRD PARTIES: Where landlord retains control of the premises, landlord is liable for damages to goods owned by third party notwithstanding a provision in the lease exculpating landlord from liability to tenant's person or property for water damage unless landlord had prior knowledge of defect. Prodigy Services Co. v. South Broad Associates, 64 F.3d 48 (2nd Cir. 1995).
The third party had stored equipment in the building pursuant to a "business agreement" with the Tenant. Landlord had retained control of the building based on (1) a lease covenant requiring landlord to make all heating and plumbing repairs within the premises and (2) a lease provision giving the landlord the right to examine the premises at any reasonable time. Interpreting Connecticut law and citing Restatement of Torts 357 (the landlord's duty here is a tort duty, although founded upon contract) the Second Circuit found that landlord was liable.
The court acknowledged that landlord, under the lease, would not have been liable to tenant, if the damage had occurred to tenant's property, because Landlord had been given no notice of the defect by tenant and consequently could not be found not to have corrected the defect. The lease language would not insulate landlord from liability to the third party under the business arrangement, however, because landlord's retention of control imposed a duty on landlord to keep the plumbing system in a reasonably safe condition. The matter was remanded to the district court to determine whether or not landlord had constructive notice of the leak, i.e. if landlord had inspected, would it have discovered the leak?
Comment: Would the same rule have applied to damage claims by a subtenant? If the answer is yes (and the editor suspects that it is) then landlords who seriously expect exoneration from liability without actual prior notice of defects might want to consider exacting such provisions from lessee as part of the sublessee approval process.
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