Increased Liability Exposure to Commercial Tenants Despite Contractual Protections from Landlord

By: Kali A. Hira, Esq.

Pursuant to well established New Jersey law regarding premises liability, duties owed to invitees of commercial tenants and land owners are often contractually determined through detailed lease agreements.  The commercial lease agreement often assigns control over specific areas of the property to either the tenant or the landlord.  With the assignment of control comes the obligation to keep the designated areas free of hazardous conditions and the liability exposure for failure to do so.  Recently there has been a significant shift in the weight that courts afford the contractual agreements between commercial tenants and landowners.

In the 2013 New Jersey Appellate Division case of William Nielsen v. Wal-Mart Store #2171 and Nassau Shopping Center Condominium Association, 429 N.J. Super. 251 (App. Div.), certif. denied, 213 N.J. 535 (2013), the Appellate Division upheld the trial court’s determination that liability could be assigned to defendant commercial tenant for a hazardous condition in a common area contractually under the control of the developer.

The plaintiff in this matter was the employee of an independent contractor retained by defendant tenant Walmart to exterminate pests.  In the course of setting traps, plaintiff was walking around the exterior of the Walmart store when he fell as a result of loose sand and gravel between a grassy area and an asphalted area.  There was no dispute that plaintiff’s fall did not occur within the boundaries of the Walmart store. In the underlying action, Walmart, who had failed to timely file a third party action against the developer, filed a motion for summary judgment arguing that because plaintiff’s fall occurred outside the boundaries of its unit and Walmart had not contractually agreed to maintain or repair the area in question, it could not be held liable.  The trial court denied summary judgment and a jury verdict found Walmart negligent and awarded plaintiffs over half a million dollars in damages.

Walmart appealed the trial court’s determination, arguing that it had no duty to warn of a hazardous condition in an area that the developer was contractually bound to repair and maintain and that the trial court erred in failing to distinguish between the duty owed towards conditions on and off a tenant’s premises.

Creating a new precedent in New Jersey, the Appellate Division affirmed the trial court’s decision and significantly limited the value of contractual protections afforded to commercial tenants.  The Appellate Division stated, “The notion that a land occupier’s duty of care extends only as far as the boundaries of its property — the ostensible central thesis of Walmart’s argument — is simply out of step with the modern course of the common law… Simply because Walmart owns only the building from which it conducts its business and not the abutting perimeter or other common elements should not alone determine the duty it owes to its invitees.”

The Appellate Division, in offering the greatest protection possible to customers and other business invitees while dismissing the protections afforded tenants via contractual lease agreements reasoned, “That Walmart had not contractually agreed to maintain or repair the area where plaintiff was injured is simply one factor to be considered in determining whether a duty of care should be imposed. In our view, this factor carries little weight…plaintiff as well as others invited to make foreseeable uses of the premises should not be limited by these contractual arrangements.  We find the private contractual arrangement of duties between unit owner and developer to have little weight because, otherwise, a commercial…tenant could blithely turn a blind eye to any defects or hazards in common areas not owned by the unit owner or tenant but foreseeably used by their invitees and passersby.”

Based upon the reasoning in Nielsen v. Wal-Mart Store #2171, commercial tenants defending against premises liability claims would be well served by actively and diligently inspecting the common area contractually controlled and maintained by landlords and documenting any complaints.  The New Jersey courts are eroding the contractual insulation of commercial tenants in favor of expanding the protections of the business invitee.