June 2011

One Slip Can Cost You Big: The Colorado Premises Liability Act
A Collection Coach tip: Are You Doing Business Under a Legal Name?

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Volume 13 • Issue 6 JUNE 2011

Landlord News 3600 South Yosemite Street Suite 828, Denver, Colorado 80237

htsnews@htspc.com www.htspc.com

Denver Phone 303.766.8004 FAX Completed Eviction Forms To: 303.766.1181 or 303.766.1819

Colorado Springs Phone 719.550.8004 FAX Completed Eviction Forms To: 719.227.1181

ONE SLIP CAN

COST YOU BIG:

The Colorado Premises

Liability Act

Accidents and other events result in injuries

to residents on rental properties. A bursting pipe may

cause damage to a resident’s property. A resident may slip

and fall on an icy sidewalk and sustain personal injury

damages. The possible events resulting in damage to a

resident, occupant, or guest are endless. Most managers

and landlords believe that they have the situation covered.

Because these possible events can occur at a rental

property, most leases address these potential problems.

However, many managers and landlords are surprised to

learn that regardless of any lease language, liability for an

injury on a rental property is always determined by the

Colorado Premises Liability Act (the “PLA”). The PLA

casts a broad net of potential liability for a wide cast of

characters, including owners, management companies,

and vendors.

The PLA makes landowners potentially liable for

injuries to residents, occupants, and guests that occur on

the owner’s property.

Because third party

fee managers are not

owners, they can relax,

right? Wrong. Managers

are defined as

owners under the PLA,

and therefore are also

potentially liable for

injuries to residents and others, resulting from property

conditions. Specifically, under the PLA a landowner

includes but is not limited to “an authorized agent or

person in possession of real property and a person legally

responsible for the condition of real property or for the

activities conducted or circumstances existing on real

property.” The broad reach of the PLA does not end

continued on page 2

A Collection Coach Tip

Are You Doing Business

Under a Legal Name?

Recently we have run into issues with clients using

a business name that is not registered with the Colorado

Secretary of State. For example, 123 Main Street

Holding, Inc. owns a multi-family property, but the

signs and advertisements identify the property as Paradise

Apartment Homes.

Colorado Statute prohibits a legal person (including

corporations) from conducting

business under a name

other than their true name unless

a current statement of trade

name is on file with the Colorado

Secretary of State. The company

violating the statute is not allowed

to use Colorado courts to collect

a debt owed and may be subject to

a penalty of up to $500.00. In a recent situation, a former

tenant sued our client in a small claims court action,

our client never received the paperwork, and the tenant

received a default judgment against the client. When the

firm reviewed the case to assess the possibility of reversing

the judgment and suing the tenant for money he owed the

client, we realized that the owner of the property did not

have a registered trade name. The client’s failure to have

a registered trade name prohibits then from suing the

tenant for the amount owed until the client registers the

name of the complex.

The good

news is that filing

a statement of

trade name with the

Colorado Secretary

of State may be

completed online in

a matter of minutes,

the fee to file the first time is $20.00, and the annual

renewal fee is $1.00. The time and expense to get a trade

name is well worth avoiding potential consequences.

ONE SLIP CAN COST YOU BIG:

The Colorado Premises Liability Act

continued from page 1

with property managers. Courts have held that liability

under the PLA can extend to vendors as well. Common

sense dictates that a vendor is

not a landowner. However,

courts have extended liability

to vendors based on a vendor’s

legal responsibility for

a particular condition on a

property. For example, if a

snow removal vendor failed to

remove an obvious sheet of ice

from the base of a stairwell, a

court could find that the vendor

was legally responsible for

the dangerous condition, and

therefore liable under the PLA.

Similar to the broad definition of landowner,

the PLA creates liability for a broad range of potential

injuries that may arise on your property. The PLA applies

to any injury resulting from the condition of real

property, or for the activities conducted on real property,

or the circumstances existing on real property. Based

on this definition, the courts have universally held that

almost any injury occurring on real property is covered by

the PLA. Slip and falls, mold, and frozen pipes are three

common events occurring on rental property. Because

these events are based on the condition, activities, or

circumstances existing on real property, they along with

a host of other common situations are covered under the

PLA. While not every injury is covered, the exceptions

are extremely narrow. The courts have only carved out an

exception for commercial

recreational

activities that had

little or no connection

with the land

itself. For example,

because boating activities

conducted on

real property did not

impact the property

making it more dangerous,

or the cause

of the injury, courts have found such injuries not covered

by the PLA.

Because we know our clients so well, we know

what you’re thinking. You don’t have to worry about

premises liability because you have addressed this issue

in your lease. Your lease contains a liability waiver

and release. Almost every lease has a liability waiver. A

liability waiver, also known as an exculpatory clause, is a

lease clause that states the landlord and the management

company are not liable to the resident for injury to the

resident or the resident’s property for any reason, except

and unless the property manager is grossly negligent.

Unfortunately, the Colorado Supreme Court in 1996

ruled that liability waivers are unenforceable in residential

leases as a matter of public policy. Accordingly, liability

waivers do not bar PLA claims. The rationale for this

holding is twofold. First, the Colorado General Assembly

has clearly determined that landlord tenant relations are a

matter of public concern. Second, the courts have found

that liability waivers are based on unequal bargaining

power. Specifically, residential tenants have no opportunity

to negotiate leases, but rather are presented with such

documents on a take it or leave it basis.

Does this mean you shouldn’t have a liability

waiver in your lease? Absolutely not. A strong liability

waiver should remain a part of every well-written lease.

Many residents, and even a fair number of attorneys, are

unaware that liability waivers in residential leases have

been stricken on public policy grounds. Similar to other

lease language, the language might not hold in court, but

the language discourages the resident from bringing a

lawsuit. No lawsuit, no liability. Further, who knows if

and when

the law

might

change? If

the law does

change, you

don’t want

to be caught

without

a liability

waiver in your lease. Additionally, the rental industry

has changed significantly since the Colorado Supreme

Court issued its ruling in 1996. Many leases now require

residents to obtain renters insurance to insure against

damages, and strongly warn residents about the potential

for unanticipated events and the significant consequences

of not having renters insurance. In cases not involving

landlord negligence and leases requiring mandatory

renters insurance, an argument could be made that the

liability waiver should be enforced.

Colorado courts have also held that the PLA is a

resident’s sole remedy against you when the resident is injured

on your property. This negatively impacts the rental

industry in two significant ways. First, as just discussed,

in all likelihood, this means your liability waiver isn’t going

to hold up. Second, the PLA’s applicability potentially

increases the type and amount of damages a resident could

recover for injuries to person or property. Your relationship

with your resident is based on a lease. A lease is a

contract. Under Colorado law, generally a resident can

continued on page 3

Landlord News JUNE 2011 Page 2

pipe, let alone that you failed to reasonably protect against

the danger of the pipe bursting. You can’t protect the

resident against something you don’t know about, or had

no reason to know about when you were diligently maintaining

the property.

The PLA has broad applicability and implications

for property owners and managers. Because you

can’t contract around PLA liability, adequate insurance

coverage is critical. The rental industry has been moving

toward making resident renters insurance mandatory.

PLA liability is another solid reason why every owner

and property manager should consider making renters

insurance mandatory for all residents. Property managers

should be confident regarding a host of other insurance

related issues. Property managers need to be clear as

to potential PLA coverage and exclusions. For example,

many policies exclude mold, but mold related lawsuits

are a common PLA claim. Finally, potential PLA liability

should be addressed in all management contracts. Managers

and owners rights and responsibilities in connection

with PLA liability should be clearly addressed in the

management contract.

JJJJJJJJJJJ

ONE SLIP CAN COST YOU BIG:

The Colorado Premises Liability Act

continued from page 2

only recover breach of contract damages against you if you

breach the lease contract, unless the law imposes an

independent duty. While there are no reported Colorado

cases, Colorado courts are very likely to hold that the

PLA creates an independent tort duty, separate and apart

from the lease contract. Once a court determines this, an

injured resident would be able to recover damages, above

and beyond contractual damages. For example, punitive

damages are not recoverable in a breach of contract action.

However, punitive damages would be recoverable in

a PLA action.

This is the bad news.

The good news is that PLA’s

exclusive application eliminates

negligence claims. If a resident

is injured on your property,

a resident can theoretically

recover damages under a negligence

legal theory if you owe

them a duty of care. Whether

or not you owe a resident a duty

in particular case is not an exact

science. The judge decides as a matter of law whether you

owe a resident a duty in a negligence case. Because the

PLA exclusively applies, the judge doesn’t get to decide.

Under the PLA, the issue is whether you knew or should

have known, using reasonable care, about the condition

or situation that led to the resident’s injury. The

PLA isn’t going to help you if you know about something

and fail to act. However, applicability of the PLA can be

a game changer in a lot of typical situations arising on

rental properties.

Take your typical busted pipe situation. The pipe

bursts, floods the resident’s unit, and the resident demands

all sorts of damages. Under a negligence standard,

the key issues would be duty and breach of duty. Again,

the duty issue is a question of law for the court. Many

judges would quickly conclude that you have a duty to

maintain the premises. Your breach of the duty then

almost becomes

a self-fulfilling

conclusion. The

pipe burst so

you must have

failed to properly

maintain it. Under

the PLA, the

inquiry shifts to

your knowledge about the pipe. If you had no knowledge

about the pipe and had no reason to know, the resident

can’t prove that you knew or should have known about the

Landlord News JUNE 2011 Page 3

IMPORTANT HTS JUNE DATES

June 8th Advanced Fair Housing

HTS Lower Conference Center

3600 S. Yosemite St.

Denver, CO

8:30 a.m. – 11:30 a.m.

June 17th South Client Lunch

Dave & Busters

2000 S. Colorado Blvd.

Denver. CO

11:30 a.m. – 1:00 p.m.

Flag Day

June 14

“America will never be destroyed

from the outside.

If we

falter and lose

our freedoms,

it will be because

we destroyed

ourselves.”

Abraham Lincoln

Landlord News JUNE 2011 Page 4

“They who would give up an essential liberty for temporary

security, deserve neither liberty or security” Benjamin Franklin

“The Constitution is not an instrument

for

the government

to restrain the

people, it is an

instrument for

the people to restrain

the government

— lest

it come to dominate

our lives

and interests”

Patrick Henry

“It is the duty of the patriot to protect his country from its

government.” Thomas Paine