As of July 1, 2013, a new lease disclosure requirement added one more responsibility for owners and lessors of commercial property. Civil Code Section 1938, part of the legislation designed to limit unwarranted lawsuits brought under the Americans with Disabilities Act (ADA), provides as follows:
A commercial property owner or lessor shall state on every lease form or rental agreement executed on or after July 1, 2013 whether the property being leased or rented has undergone inspection by a Certified Access Specialist (CASp), and, if so, whether the property has or has not been determined to meet all applicable construction-related accessibility standards pursuant to Section 55.53.
California Civil Code Section 1938 specifically addresses “commercial” properties, which under California Civil Code 1995.020 means all properties other than for residential purposes. The CCDA has confirmed that the provision is not applicable to residential leases.
The CASp inspections can help commercial property owners avoid the “drive-by” lawsuits that are becoming more and more popular. These kind of suits are especially common for businesses in high traffic areas, such as large chains. Generally, a plaintiff will file suit over an ADA violation with the intention to squeeze money from the property owner. Settlements of these suits typically cost tens of thousands of dollars, in addition to attorney fees.
A CASp inspection will help owners identify violations and remedy them to avoid being sued. However, the property owner must keep in mind that once the inspection is done and violations are identified, the owner is put on notice of the violation and is expected to remedy it, otherwise they face greater liability
What the New Law Requires
There is no requirement that an owner actually do any inspections under the new law. Instead, all that is required is a disclosure be made in leases of commercial property so that a prospective tenant has the basis for making a determination as to whether or not to lease space at the property. Civil Code Section 55.53(f) specifically states that nothing in the statute is intended to require a property owner or tenant to hire a CASp inspector and that the election to not hire a CASp “shall not be admissible to provide that person’s lack of intent to comply with the law.”
One common question we are seeing is whether this new disclosure requirement applies to amendment, assignments, or extensions. The statue does not provide any insight on this, and only requires that a property owner or lessor state “on every lease or rental agreement executed on or after July 1, 2013” the required disclosure. Clearly, the safest course of action for the lessor is to make the disclosure in any amendment, assignments, or extensions.
While Section 1938 does not identify the consequences if a lease does not contain the required information, it is feasible that a commercial tenant could raise a claim to rescind a commercial lease if he was sued for failing to comply with disability access laws and the lease did not expressly comply with the requirements of Section 1938. Alternatively, a claim could be asserted by way of a cross-complaint that the landlord’s failure to comply with state law exposed the tenant to damages for which the landlord should be responsible.
Note – if you are a property owner in San Francisco, one of San Francisco’s “micro-lenders” has created a program to offer loans from $1,000 to $50,000 to assist you with the cost of a CASp inspection and report, access improvements, and legal assistance. More information on this can be found at www.sfgsa.org.
If you have any questions about your commercial lease, or real estate law generally, please do not hesitate to contact us at (650) 327-2900 x 19.