COMMERCIAL LANDLORD LIABILITY FOR DEFECTIVE
PROPERTIES

By David M. Griffith, Esq.

Q. We just acquired a large community shopping center that is over twenty years old. We are concerned that there may be certain features of the buildings that we acquired that are not up to current safety standards as in some of the newer properties we are acquiring. What are our responsibilities for upgrading these buildings and will we held strictly liable for certain “defects” in the premises if such coniditions were not considered hazardous or unsafe when the property was first constructed?

A. There was finally some good news recently for California commercial landlords when the California Supreme Court rendered its decision in Peterson v. Superior Court. In Peterson the court reversed a prior ruling that had been the law in California for the past ten years, in deciding that commercial landlords may not be held strictly liable for injuries to tenants caused by defects in leased buildings.

* Becker v. IRM Corp. Overturned. In 1985 the California Supreme Court had determined in Becker v. IRM Corp. that under Califonria’s products liability laws, a residential landlord may be held strictly liable in a civil tort lawsuit for an injury to a tenant caused by a defect in a leased building. In Becker the plaintiff was a tenant in a rented apartment and was injured when he fell against a shower door, which was made of untempered glass. The tenant broke and lacerated his arm when he fell against the door. The apartment complex in question was built more than 10 years before the defendant landlord acquired it. The plaintiff argued successfully that a landlord should be considered part of the “stream of commerce” involved with a particular product, including the manufacturer, retailer and others in the marketing chain of a product. Based upon that philosophy the court determined that strict liability should be imposed on landlords for product defects in their buildings.

* Landlord Normally Outside the “Stream of Commerce” Involved with Building Defects or Defective Products in the Building Structure. In Peterson, however, the court rejected this position and sited with approval the dissents of Justices Mosk and Lucas in the Becker case who concluded that they “would hold that a subsequent purchaser of property who has not installed, altered or created the item or condition which is claimed to be defective, and who has no actual or constructive knowledge of any defect therein, should not be held strictly liable... where the landlord has no continuing relationship with the chain of marketing leading back to the manufacturer of the defective product, and thus has no way of influencing the production or design of the product or of adjusting potential costs of the manufacturer’s enterprise or others in the business of marketing the item at issue, imposition of strict liability is inappropriate.”

* No Implied Insurance of Tenant Safety as to Latent Building Defects. The court stated that the effect of imposing upon landlords liability without fault was to compel them to insure the safety of their tenants in situations in which injury was caused by a defect of which the landlord neither knew nor should have known. “A landlord’s duty is not to isnure the safety of tenants but only to exercise reasonable care.” The court sited with approval the decision of a New Jersey appellate court in Dwyer v. Skyline Apartments where a tenant who had occupied an apartment for 15 years was burned when she turned on the hot water faucet in the bathtub in her apartment and the entire fixturre came out of the wall, causing scalding water to gush from the pipe. The faucet was discovered to be very corroded but it was determined that neither the plaintiff nor the landlord had any idea of the faucet’s condition prior to the accident because the corrosion had been hidden inside the wall. With Peterson California now follows the position embraced by all other states except for Louisiana, which is that a landlord is not the insurer of the safety of tenants, but is only required to exercise reasonable care and to avoid injuries to tenants which he has knowledge of, or of defects which have existed for so long a time that he had both an opportunity to discover and to remedy the defect.

* Compare Situations Where Landlord Participates in Construction of Buildings or Makes Alterations to Premises. The Peterson decision did not specifically deal with the issues of where the landlord was also the builder of the property or had undertaken substantial alterations to the building in question. The court did site several other decisions in other states to indicate that strict liability might still be applied in such situations where the landlord was the builder of the defective building or had made alternations to the building. If the landlord did not make alterations to the building then it was believed that imposing strict liability for defects would be inappropriate. The court analogized such situations to sellers and purchasers of used equipment. If the seller has rebuilt or reconditioned the equipment then he may be deemed to be a “manufacturer” of the equipment and potentially strictly liable for defects. Thus any landlord who has participated in the rehabilitation of a shopping center that is later determined to have defective products installed in the retrofitted buildings may not benefit from the Peterson decision.

* Landlord’s Potential Liability for Negligence Still Applies to Require Inspection. The California Supreme Court in the Peterson decision made it clear that its decision did not affect the landlord’s duty to inspect the premises for dangerous conditions of which he knew or should have known. “A landlord in caring for his property must act toward his tenant as a reasonable person under all of the circumstances including the likelihood of injury, the probable seriousness of injury, the burden of reducing or avoiding the risk and his degree of control over the risk-creating defect. Thus the California appellate court’s decision in Portillo v. Aiassa cited in the Fall 1994 issue of California Centers still applies to such situations.

David M. Griffith is a real estate and business attorney with offices in Long Beach. For more information please contact 310/983-8017.