Who’s Liable- The Landlord or the Tenant?

February 14, 2017 Asset Protection, Business planning, Litigation, Real Estate, Small Business Comments Off on Who’s Liable- The Landlord or the Tenant?

We have many clients that own residential rental and commercial properties and lawsuits involving landlords continue to happen throughout the country, and will continue so long as someone is willing to ‘rent a room’ and someone is likely not to pay or damage something.

However, the question then becomes…who’s liable when something goes wrong.  As you can imagine a lot of finger pointing takes place and it can oftentimes be difficult to see who is in the right.

Thus, history has taught one of the most important lessons of all- “learn from the past”.  As such, I have compiled a brief snapshot of a few recent court cases throughout the country that have dealt with landlord liability.  Hopefully learning from one of these difficult situations will help you avoid the some of the same mistakes.

In a case called Lipp v. Ginger C., LLC (W.D. Mo., 2016), the tenant threw a party. Surprise…Surprise!!! And as you would expect, one of the guests, who had been drinking at the party, went onto a second floor deck to urinate. While on the deck, the wooden balcony broke, causing the guest to fall 18 feet onto the driveway. He then died a few days later. The landlord knew that the balcony had been temporarily repaired by a prior owner, but the landlord had not permanently repaired the balcony as of the date of the party. The family of the deceased guest sued the landlord.

In a case called Ortega v. Murrah (Tex. App., 2016), the tenant broke her leg after slipping on water that had leaked from a broken pipe under the rental property’s kitchen sink. The tenant sued the landlord for personal injuries.

In a case called Moore v. Parham (Ariz. App. 2016), the landlord owned a residential property in Lake Havasu that he leased to a tenant. A satellite dish installer came to the property to install a satellite dish for the tenant. The installer was injured when he attempted to access the roof by climbing on a shade structure attached to the house. The installer sued the landlord for personal injuries.

Lastly, in a case out of California last year called Ramos v. Breeze, 2016, the tenant tripped and fell in the parking lot of the apartment complex in which she was living.   The tenant sued the landlord for personal injuries.  The landlord was held substantially liable for the injuries.

These are just a few of many recent cases involving landlord liability and a landlord being sued. Most of the cases above are still working themselves through the court system in terms of being resolved on the merits, but the point is that if you’re a landlord, you need to consider your exposure to liability and consider what steps you can take as a preventative measure, including the following:

  1. Have your landlord-tenant agreement reviewed. Whether you’re a landlord of commercial real estate, or investment residential real estate, you need to make sure you have a strong “landlord-friendly” agreement. Have you had it prepared or at least reviewed by an attorney?
  1. Review your rental property insurance policies and applicable limits. If a landlord is subject to a legitimate claim, hopefully it never ripens into a lawsuit because the claim is a covered event under the appropriate insurance policy. But make sure you know exactly what claims are covered and what claims are not covered under your insurance policy(ies) so that you know what is and what is not covered under the policy(ies). Do you know what policies you have and what events are covered and what events are not covered?
  1. Consider how you’re managing your rental(s). You want to make sure you utilize best practices and procedures for managing your rental(s), whether you can and are managing them yourself or you have someone else manage them for you.
  1. Consider how you’re vetting your tenant(s). Are you being careful to properly vet/screen your tenants? A little extra time on the front-end to make sure the tenant is properly qualified will save you a lot of time later on.
  1. Consider an entity(ies) for your rental(s). Certainly having an LLC own your rentals is not the end-all, be-all, and it won’t in of itself prevent a lawsuit. However, it can, unless abused, prevent you from personally being named in the lawsuit, and thus exposing your personal assets in the event the plaintiff obtains the judgment against you.

Even in cases in which the landlord “wins”, the time spent and the costs involved to defend the lawsuit can be enormous. An ounce of prevention is worth a pound of medicine, particularly when it comes to landlord liability. This type of liability can arise in a number of ways, including failure to comply with statutory requirements, a breach of contract, premises liability, or negligence.

Each one of these liabilities requires a state-specific analysis based on statutes and cases in the particular state in which the property is located. Please contact our office at 888-801-0010 if you would like to schedule a consult regarding these matters.

About the author

Kevin is an associate attorney at the Phoenix, Arizona office of Kyler Kohler Ostermiller, and Sorensen, LLP (“KKOS Lawyers”). Kevin’s practice areas include real estate, securities and raising capital, self directed IRA law, business entity formation, and estate planning. His experience prior to joining KKOS lawyers allowed him to focus on representing the small business owner in many facets of the law, including business transactions and litigation, real estate matters, bankruptcy, and estate planning. Kevin is a zealous advocate for his clients and has a passion for finding solutions to their problems.