On May 1, 2020, Pennsylvania Governor Tom Wolf announced the first counties set to shift from red phase to yellow phase as part of the plan to reopen social and business activity in the Commonwealth – with all counties in the green phase as of July 3, 2020. As states nationwide commence reactivation of their economies, public-facing businesses face challenges in protecting their employees and customers.
The scale of the social and economic impact of COVID-19 presents commercial landlords with difficult questions: What is their liability if their tenants’ invitees can trace infection to their leased premises? What are the risks when landlords take proactive infection mitigation measures in lieu of their tenants?
Premises Liability
Premises liability standards may provide some guidance if a commercial tenant’s customer or employee is infected and brings suit for injury. Generally, with exception, landlords are not liable for injuries caused to third parties on leased premises they do not maintain or control. They should be aware, however, of cleaning or maintenance responsibilities reserved under their leases that may impose an expectation for them to enhance sanitization efforts in transferred premises.
In Jones v. Levin, 940 A.2d 451 (Pa. Super. Ct. 2007), an employee slipped on ice in a store parking lot and filed a negligence suit against the administrator of the estate that owned the property, which was under a month-to-month lease. The Pennsylvania Superior Court reiterated the general rule that an out-of-possession landlord is not liable for third-party injuries, unless, for example, it had control over the defective area. The court held that there were genuine issues of material fact regarding the landlord’s control and whether there was a true landlord-tenant relationship at the time of the injury; the lease required the landlord’s consent before the tenant could make structural repairs. The court further addressed the concept of a “public use” exception: namely, if the leased premises is open to the general public, an out-of-possession landlord may be liable for failing to inspect or repair dangerous conditions before transferring possession to the tenant. Following New York law, the Superior Court held that the exception could apply to employees harmed in areas the public could access.
There may also be parallels to liability for third-party criminal activity where, for instance, there are inadequate safeguards for ensuring that customers wear masks or socially distance. In Jardel Co. v. Hughes, 523 A.2d 518 (Del. 1987), a property owner was liable for failing to provide adequate after-hours security when the employee of a shopping mall tenant was assaulted while heading to her parked car. Here, the Delaware Supreme Court distinguished situations involving landlord-tenant contractual obligations from “the claim of a third party to whom the landlord extended the expectation of safety by providing a security system over the common areas of the mall.” A possessor of land may be liable if it fails to exercise reasonable care to discover harm or the likelihood of harm by others, or adequately warn or protect against it. Prior criminal incidents induced a “duty to foresee specific criminal conduct,” and the jury could determine the protection provided by the owner was insufficient.
Best Practices for reopening
Where landlords maintain some control over common areas and leased spaces, they should take reasonable preventative measures to reduce opportunities for the spread of infection. This includes, at a minimum, following state and federal guidance on reopening or operating. In Pennsylvania, for instance, businesses with in-person operations must follow guidelines issued by the Centers for Disease Control and Prevention and the Pennsylvania Secretary of Health. Reopening green-phase county businesses may have occupancy restrictions of 50 to 75 percent, and businesses should develop plans for handling COVID-19 exposure.
Contractually, a landlord may have recourse against a tenant that fails to follow local jurisdictional requirements, as claims stemming from non-compliant business operations may trigger lease indemnification provisions. Landlords should review their leases to determine their rights, if any, in the event they are sued by a tenant’s customer or other third party.
Unlike environmental conditions such as mold or asbestos, the risk of COVID-19 infection in a public-facing space is not necessarily tied to inherent property issues. Nevertheless, property owners may wish to reevaluate their spaces to enhance health and safety as employees and customers return to areas with high foot traffic. Developing robust cleaning polices and finding ways to reduce building contact points, or giving more consideration to building air quality, may help mitigate the spread of illness.
Landlords should be conscientious of what they undertake, however. Tenants or patrons may hold them to account for the adequacy of enhanced cleaning or touch-free technologies if an infection is later traced to their premises – just as mall-provided security was deemed inadequate in Jardel. Alternatively, they could be challenged for enforcing policies that are more lax or more strict than local, state, or federal recommendations and requirements. In an environment where businesses are encouraged or required to adopt safer practices as cases continue to rise, and so long as measures are properly implemented, the benefit of being proactive to reduce infection should outweigh the risk of “no good deed going unpunished.”
Conclusion
Commercial landlords should anticipate the possibility of COVID-19 exposure within their tenants’ premises and be prepared to enhance sanitization efforts or limit access to common areas within their control. They should work with their tenants to ensure compliance with local law and lease responsibilities and should develop actionable policies to address exposure within their buildings.
Reed Smith’s real estate attorneys can assist you in evaluating your state’s legislation as it relates to premises liability risks. Please contact us to request a consultation and/or evaluation of the law in your state.
Our Reed Smith Coronavirus team includes multidisciplinary lawyers from Asia, EME and the United States who stand ready to advise you on the issues above or others you may face related to COVID-19.
For more information on the legal and business implications of COVID-19, visit the Reed Smith Coronavirus (COVID-19) Resource Center or contact us at COVID-19@reedsmith.com
Client Alert 2020-441
