CREJ - Property Management Quarterly - August 2015
It’s a sunny day outside of ABC office building. Patrons are coming and going to and from the building; business is booming. It is a wonderful and prosperous day until Johnny, leaving the dentist office, trips over an uneven sidewalk. Johnny is taken to the hospital where he is diagnosed with a broken leg, which takes months of rest and physical therapy to heal. Johnny misses a significant amount of work due to this injury and suffers from depression because the injury costs Johnny thousands of dollars – so he sues the building owner, dentist (tenant), property manager and anyone else he can find under the theory of premises liability to recover his lost wages and any other damages that he may be lucky enough to collect. When a person sustains injuries due to a condition, activity or circumstance existing on a property, that person can sue the landowner of the property under the Premises Liability Act. However, under the Premises Liability Act, “landowner” does not exclusively mean the person who legally owns the land. Rather, landowner means the person or agent who has possession of the property and is legally responsible for the conditions, activities and circumstances existing on a property. Depending on the situation, the landowner could be anyone from the landlord or the property manager to the property management company or even the tenant. In a recent Colorado Supreme Court case, Jordan v. Panorama Orthopedics & Spine Center PC, the court determined whether a specific tenant could be held liable for injuries occurring on the premises. In the case, a woman fell on an uneven sidewalk while walking to meet her husband after receiving treatment at the Panorama Orthopedics & Spine Center at the Panorama Medical Campus. From this fall, the woman fractured her orbital bone and sustained a concussion. The injured woman sued Panorama Orthopedic & Spine Center, a tenant of the building, under the Premises Liability Act. However, since the woman tripped over sidewalk in a common area, the Colorado Supreme Court needed to determine if Panorama, as a tenant, could be held liable in this situation. Ultimately, the court determined that Panorama was not liable for the injuries to the injured woman under the act. The court came to this conclusion because Panorama was not in exclusive possession and control of the common area. The landlord retained responsibility for the conditions of common areas, and Panorama was not legally responsible for the activities conducted in the area where the injuries occurred. Takeaways for Landlords The court’s decision limits the circumstances under which the tenant can be held liable under the Premises Liability Act. Unless a tenant has at least some exclusive possession over an area and the legal responsibility to make repairs to that area, the tenant likely will not be held liable. Even indemnity clauses in leases will not be able to protect landlords. Accordingly, landlords need to consider the following precautions. Give control and possession of common areas to a major tenant. In order to avoid liability for injuries sustained on the premises, landlords may find it beneficial to give control of maintenance and upkeep of common areas to a major tenant. When doing this, it is very important to ensure that a lease specifies that the tenant will be responsible for all conditions, repairs and maintenance on all areas of the property. Limit liability with lease provisions. While there are few lease provisions that will prevent liability for injuries sustained on the premises, there are lease provisions that will limit liability in the event that a tenant’s patron gets hurt while on the property. Ensure that a lease has an indemnity clause and ensure that the lease specifies what areas are the responsibility of the tenant to maintain. While these clauses will not eliminate the amount of liability risk, they do help limit the instances that a landlord will be liable. Ensure the premises are maintained. One of the best ways to avoid liability for injuries sustained on the premises is to ensure that no hazardous conditions exist on the property. Constant inspection and repairs to eliminate hazardous conditions can be expensive. Thus, it may be a good idea to have maintenance and repairs included in a lease as additional rent. This way the financial burden of maintaining the property does not rest solely on the landlord. Be knowledgeable about the condition of the property. Another way to avoid liability for injuries sustained on the premises is to be actively involved in the inspection of the premises. While it might be included in a lease provision that the tenants should notify the property manager of dangerous conditions on a property, that lease provision is unlikely to protect the property manger or the landowner from liability for damages following an injury on the property even if the tenant failed to report. As such, it is a good idea to inspect the property regularly. Ultimately, this Colorado Supreme Court decision shows that landlords are responsible and should take precautions to avoid liability under the Premises Liability Act. Strong lease language, regular inspections and repairs have never been more important.