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 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 your 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 recovery 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 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 residents 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 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 renter’s insurance mandatory.  PLA liability is another solid reason why every owner and property manager should consider making renter’s 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.

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