Daily Development for
Tuesday, August 29, 1995

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

NUISANCE; LANDLORD'S LIABILITY; LEAKING UNDERGROUND STORAGE TANKS: Landlords are not liable in nuisance or trespass for leaking underground storage tanks maintained by their tenants where landlords played no active role in the activity leading to the leaks. Resolution Trust Corp. v. Rossmoor Corp., 40 Cal. Rptr. 2d 328, (Cal. App. 2d 1995) The court views this case as one of first impression in California, characterizing earlier court discussion of the issue as dicta or otherwise not on point. It acknowledges that landlords are sometimes responsible for injury caused by their tenants, but stresses that liability does not arise from ownership alone. The landlord must have had the power to terminate the relationship and have negligently failed to do so in a way that caused injury to the plaintiff.

Here, the landlord did have the power to terminate for violation of environmental laws, but the leakages in question would not have been discoverable by reasonable inspection by a landlord, so the landlord was not negligent in failing to discover and react to the problem. When the landlord did learn of the problem, circumstances suggested that it had been cured and would not recur, indicating that termination of the lease would have made no difference.

Comment 1: This case is good news for the landlord in general. But do we see the old Fleet Factors reasoning creeping in the back door? There is a suggestion here that if the landlord can do something about LUSTS, it must do something. Here, of course, the court also indicates that the landlord must have had reasonable opportunity to identify the problem, but that still places the landlord in the position of "after the fact" judgments about the reasonableness of its inspection policy.

It seems unfortunate that the careful and responsible landlord, who attaches extensive anti-pollution covenants to the lease and reserves extensive inspection rights, may have greater exposure to liability for tenant conduct than the landlord who simply "gives away the store" on tenant controls and collects the rent checks in Bermuda.

Comment 2: A 1992 California case suggests that plaintiffs may have another approach to the problem of the landlord who retains to control power in the lease. In Sachs v. Exxon Co., U.S.A., 12 Cal. Rptr. 2d 237 (Cal. App. 1992), the court held that tenants have a duty of good faith and fair dealing to conduct their affairs in such a way as not to expose the landlord to liability for environmental hazards, including LUSTS. This included a duty to permit landlords reasonable access to their property for purposes of inspection, even though the lease is silent both about leaking tanks and inspections. The tenants conducted their own inspections and permitted landlord access to those results, but the landlords had the right to conduct their own inspections if they had reasonable misgivinings about the tenants' reports.

The case, again, is a victory for the landlords, but with an aftertaste. If the landlord indeed has a general power to inspect, even to go underground to look for leaks in the tanks, then does it have a general duty to conduct such inspections?

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