Tag: lease

What ifs….. Indemnifying Premises Liability Exposure

If you are a property owner, stop and think about the “what ifs” before you enter into a lease with a property manager or lessee. For example, what if an invitee of the property that you own is hurt while on and/or because of a condition on the property? Who is responsible?

A property owner may be able to transfer its potential liability to a property manager or lessee of the property if the lease contains an indemnification provision. However, not all indemnification provisions are enforceable, and these critical provisions are often litigated.

The Eastern District Court of Louisiana recently enforced an indemnification provision, granting  summary judgment to a landowner who sought indemnification from its property lessee in Avila v. Village Mart, LLC, Civ. A. No. 20-1850, 2021 WL 4439579 (E.D. La. 9/28/21). In the case, a shopping center leased retail space to a men’s store. Before the store opened, a painter was injured when he fell from a ladder. The owner of the shopping center argued that the lessee owed a defense. It argued indemnity applied because the plaintiffs’ claims arose out of the lessee’s buildout construction, over which the owner did not have any care, custody, or control.

In response, the lessee argued that the owner was not entitled to indemnification because the plaintiffs’ claims did not “arise out of or were connected with Tenant’s use, occupancy, management or control of the Leased Premises.” The lessee claimed that it was not using, occupying, managing, or controlling the leased space because the only permitted use of the space was to sell menswear, and the space was not being used for this purpose at the time of the accident.

Louisiana courts often apply a “but for” causation test to such “arising out of” language in indemnity provisions.  Avila, 2021 WL 4439579, at *5, citing Kan. City S. Ry. Co. v. Pilgrim’s Pride Corp., No. 06-03, 2010 WL 1293340, at *6 (W.D. La. Mar. 29, 2010), and Perkins v. Rubicon, Inc., 563 So.2d 258, 259-60 (La. 1990). The court observed the lessee’s arguments contradicted language in the lease that allowed the lessee to use and occupy the store before it opened to the public. The lease also explained that the lessee was responsible for certain construction work and identified specific dates to begin work and to open the store. Thus, the lease contemplated use and occupancy before the store was open to the public. The court found that the lessee’s possession of the space and its construction obligations under the lease established its use and occupancy of the space. The court stated:

Given the broad language in the indemnity agreement – ‘arising out of or connected with’ – [the plaintiffs’] injuries, resulting from his work as a subcontractor painting the premises leased by [the retail space lessee,] are connected to [its] use and occupancy of the premises. … Because [the retail space lessee] was in possession of the space, and had assumed responsibility for the buildout and for contractors and subcontractors working on the buildout, the Court finds that the plaintiffs’ liability theories fall within the scope of the indemnity provision in the lease.  Avila, 2021 WL 4439579, at *6.

The enforceability of indemnity provisions such as the one examined in Avila will continue to be litigated. In the meantime, Avila reminds us of the importance of sound indemnity language to anticipate the “what ifs.”

RENTER BEWARE: Hidden Risks in Lease Agreements

With home prices soaring in today’s housing market, many people choose to rent rather than buy. Factored into their decision is the style, the square footage, the location, and other criteria, but few renters consider one risk that comes with many, if not most, leases. Many renters are exposed to personal liability for accidents occurring on the premises, and they don’t even know it.

A lease is executed between the renter/tenant (the “lessee”) and the property owner (the “lessor”). By law, the lease imposes general obligations on both parties.

The lessee (renter) is bound:

1. to pay the rent in accordance with the agreed terms;

2. to use the thing as a prudent administrator and in accordance with the purpose of which it was leased; and,

3. to return the thing at the end of the lease in a condition that is the same as it was when the thing was delivered to him, except for normal wear and tear. LSA C.C. Art. 2683

The lessor (property owner) is bound:

1. to deliver the thing to the lessee;

2. to maintain the thing in a condition suitable for the purpose of which is was leased; and,

3. to protect the lessee’s peaceful possession for the duration of the lease.” LSA C.C. Art. 2682.

These general obligations are typically expanded by terms in the lease because the lessee and lessor are “free to contract for any object that is lawful, possible and determined or determinable.” Family Care Services, Inc. v. Owens, 46 So.3d 234 (La. App. 2 Cir. 8/11/10). This “freedom of contract” allows the parties to construct their own bargains, shifting certain rights and obligations. In many commercial and residential lease agreements, this shifting includes a transfer of the liability for vices or defects on or in the leased premises.

Although the lessor warrants that the leased premises is free of vices or defects, Louisiana law allows the lessee to assume responsibility for the condition of the leased premises under LA. R.S. 9:3221. Often, lessees assume that the lessor, as the owner of the premises, will be responsible if there is an accident. However, cases such as Jamison v. D’Amico, 955 So.2d 161 (La. App. 4th Cir. 3/14/07) demonstrate that the owner may be entirely free of fault even though they owned a defective premises which caused an accident. In Jamison, a worker was injured when a floor collapsed beneath her. There was insufficient evidence that the owner was aware of the defective floor. Because the lease contained a clause shifting responsibility, the owner was under no duty to inspect the premises and was dismissed from the case.

A lesson to all renters: read and understand the provisions in your lease. Even if you like the colors and the location, you should also like the lease contract before you sign it.