Daily Development for
Thursday, April 23, 1998
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
LANDOWNER LIABILITY; MORTGAGEES; SIDEWALK MAINTENANCE: While commercial landowners are responsible for maintaining sidewalks abutting their property and are liable to injured pedestrians, owners of residential property are not liable for injuries to pedestrians for failure to remove accumulated snow on abutting public sidewalk, and mortgagee in possession of vacant residential property is not a "commercial landowner" for purposes of imposing sidewalk liability.
Briglia v. Mondrian Mortgage Corporation, 698 A.2d 28 (N.J.Super.A.D. 1997), cert. denied,702 A.2d 352.
The court considered that the mortgagee in possession did not derive a benefit from the sidewalk, the mortgagee was not conducting a daily business, and could not even list the property for sale until there was a judgment in foreclosure. In addition, the court noted that even if the mortgagee were to list the house for sale, the house would not be considered commercial property.
Note: although the court does not discuss the case, the reporter's headnotes indicate that this case overrules Colarte v. Federal Nat'l Mortgage Assn, 689 A.2d 869 (N.J. Super 1996).
Comment: The New Jersey case that started initiated the concept of landlord liability for sidewalks is: Stewart v. 104 Wallace St., Inc., 87 N.J. 146, 157, 432 A.2d 881 (1981). Stewart drew the line between commercial and residential uses, and stated that the distinction between what is residential and what is commercial would be established through application of "commonly accepted definitions," but then went on to hold that residential apartment buildings would be deemed "commercial activities" for these purposes.
In Hambright v. Yglesias, 200 N.J.Super. 392, 491 A.2d 768 (App.Div.1985), the New Jersey intermediate appeals court held that a nonowneroccupied, twofamily house was a commercial property for purposes of the Stewart rule:
"[T]he court [in Stewart ] made it clear that it was the nature of the ownership that mattered, not the use to which the property is put. Apartment buildings are residential in the sense that they are places where people live; they are commercial in the sense that they are operated by their owners as a business. In the instant case, it is undisputed the property was owned and operated by defendant as a business venture. It was, therefore, a commercial property within the meaning of Stewart . . We express no opinion as to the result where a two family house is partly owner occupied."
More recently, in Smith v. Young, 692 A.2d 76 (N.J. Super 1997), the same court held that a two family property where the landlord occupied one unit was not a commercial enterprise.
Further, in Abraham v. Gupta, 656 A.2d 1362 (N.J. Super 1995), the same court held that the owner of a vacant lot zoned commercial was not a commercial landlord for purposes of sidewalk maintenance responsibilities. The court had reasoned that the key factor in judging the nature of the owner and the use is "the capacity to generate income."
"In part, liability is imposed because of the benefits the entrepeneur derives from providing a safe and convenient access for its patrons. Secondly, such an enterprise has the capacity to spread the risk of loss arising from injuries on abutting sidewalks. . . "
The court noted in the instant case that the mortgagee had no ability to sell the house it possessed until after the foreclosure sale, and was not "conducting a daily business" on the occupied premises. Consequently, the court concluded that there was no warrant for treating it as a commercial landlord.
Comment: Whatever the merits of the original rule imposing sidewalk maintenance on commercial landowners, once the court adopts the rule, it does seem somewhat ludicrous to hold that a bank in possession of a residential property prior to foreclosure is not engaged in commercial activity. The bank made a choice whether to take possession or not. It doing so it took upon itself the responsibility to use the premises for a reasonable return or to account for imputed rents. In short, the law views the property in the hands of a mortgagee as a rental property.
In any event, the bank, in taking possession of the property, had made a business decision that corresponded to its own revenue earning activities, and certainly was a in a position to participate in the "business risk spreading" enterprise that the court seems fixed upon in the precedent discussed above.
Also see: Kubczak v. Chemical Bank & Trust Co., Docket # 105735 (Mich. 3/24/98) (http://www.icle.org/misupct/1998/03/kubczak.htm (Although lender erroneously orders borrower to vacate land and borrower sends key to lender, lender will not be regarded as having possession of the property for purposes of tort liability to third parties if lender's activities thereafter are limited to paying for utilities, maintaining insurance, and cooperating with broker originally retained by borrower to sell property.) Kubczak was the DD for March 31, 1998.
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