Liability of Commercial Landlords and Tenants Under the ADA

As stated above, as of March 15, 2012, all altered facilities that are public accommodations must comply with all of the requirements in the 2010 Standards. “An alteration is a change that affects usability of a facility. For example, if during remodeling, renovation or restoration, a doorway is being relocated, the new doorway must be wide enough to meet the requirements of the ADA Accessibility Guidelines.” U.S. Dept. Of Justice, Civil Rights Division, Disability Rights Section, “Title III Highlights,” available at www.ada.gov/t3hilght.htm. As always, the ADA does not include exceptions or grandfather provisions exempting older commercial properties, or ones that have not been renovated, from barrier removal. Discrimination constituting a violation under the Act includes “a failure to remove architectural barriers, and communication barriers that are structural in nature, in existing facilities ' where such removal is readily achievable.” 42 U.S.C. ' 12182(b)(2). Whether the removal of access impediments is “readily achievable” takes into account a number of factors including the total financial resources of both the commercial tenant and the property owner or landlord, and even their parent companies. 42 U.S.C. ' 12181(9); 28 C.F.R. ' 36.104.

Allocation of Responsibility

A commercial landlord and tenant are clearly permitted to allocate responsibility for compliance with the ADA in their lease. 28 C.F.R. ' 36.201(b). However, any such allocation would be effective only as between the parties. Id. (emphasis added). The DOJ expressly echoes this in its Technical Assistance Manual, and its guidance is consistent with the unambiguous language of the statute.

ILLUSTRATION: ABC Company leases space in a shopping center it owns to XYZ Boutique. In their lease, the parties have allocated to XYZ Boutique the responsibility for complying with the barrier removal requirements of title III within that store. In this situation, if XYZ Boutique fails to remove barriers, both ABC Company (the landlord) and XYZ Boutique (the tenant) would be liable for violating the ADA and could be sued by an XYZ customer. Of course, in the lease, ABC could require XYZ to indemnify it against all losses caused by XYZ's failure to comply with its obligations under the lease, but again, such matters would be between the parties and would not affect their liability under the ADA.

TAM ' III-1.2000, available at www.ada.gov/taman3.html. Covered entities are not permitted to disclaim responsibility for violations of the ADA. The legislative history of 42 U.S.C. ' 12182(b)(1)(A)(i) makes it clear that a covered entity cannot use a contractual provision to reduce its liability under the Act, because a covered entity's legal obligation extends to individuals in their status as customers or clients of the legal entity, and is not based on any such individual's status as a client or customer of other entities that are public accommodations. H.R. Rep. No. 101-485 (II) at 104, reprinted at 1990 U.S.C.C.A.N. 387. “A public accommodation's obligations are not extended or changed in any manner by virtue of its lease with the other entity.” Id.

Landlords and tenants remain liable to third parties for compliance, so a disabled person that is discriminated against (Claimant) may successfully sue both the landlord and tenant of the discriminating business for the Title III ADA violation. If a lease expressly states that “the tenant is solely responsible for compliance with the Act and any regulations promulgated thereunder as to the leased premises; landlord shall have no liability for compliance with such laws,” the landlord would remain liable to Claimant with regard to a violation in the leased premises, because that person's rights are not impacted by the terms of the lease. Independent Living Resources v. Oregon Arena Corp., 982 F. Supp 698, 767 (D. Or. 1997). By contrast, if the landlord was held liable to Claimant, the landlord's ability to recoup any amounts paid to Claimant from the tenant depends upon the existence and terms of the indemnification provision in the lease.

Often, lease language allocating responsibility among the parties states that the landlord is responsible for ADA compliance as to common areas serving the leased premises that is the public accommodation, and the tenant is responsible as to such leased space. Consider the sample language set forth below.

Compliance with Disabilities Law. Notwithstanding anything herein to the contrary, as between Landlord and Tenant, (i) Tenant shall bear the risk of complying with Title III of the Americans with Disabilities Act of 1990, any state or local laws governing handicapped access or architectural barriers, and all rules, regulations, and guidelines promulgated under such laws, as amended from time to time (the “Disabilities Acts”) in the Premises, and (ii) Landlord shall bear the risk of complying with the Disabilities Acts in the common areas of the building, other than compliance that is necessitated by the use of the Premises as a result of any alterations or additions, including any initial tenant improvement work, made by or on behalf of Tenant (which risk and responsibility shall be borne by Tenant).

Drafting Considerations

The effectiveness of the new 2010 Standards is a good reason to revisit lease provisions regarding the ADA. Consider the new 2010 Standards in negotiating and drafting the same and in counseling your clients. The following include certain of these considerations to discuss with your clients and keep in mind when drafting lease provisions relating to compliance with the ADA and other disability laws and regulations and any related indemnification:

• A general provision that requires the tenant to comply with all applicable laws only requires a tenant not to violate the law within the areas that are leased and would not necessarily obligate a tenant to go above and beyond and make structural improvements to the leased premises to comply with the ADA. David Warren Peters, “Who's Responsible for ADA Compliance ' Landlords or Tenants?, Real Estate Issues, Summer 2004.
• A tenant's obligation to undertake all necessary work to maintain ADA compliance would not extend to areas not exclusively occupied by such tenant, such as common areas, unless expressly provided in the lease. Id.
• Compliance with the ADA only does not ensure compliance with state or local laws that may be more stringent.
• Ambiguously drafted language is generally construed against the drafter, which is often the landlord in commercial leasing.
• Even express allocations of obligations under the ADA between the tenant and landlord will not insulate the other party from third-party claims for non-compliance without an appropriate indemnification provision. Indemnification provisions should be included in the provisions allocating responsibility under the ADA to address breaches under that provision or the general indemnity provision must be broad enough to permit recovery for claims and losses related to ADA claims.
• Consider requiring a landlord representation that as of the effective date of the lease (or completion of any tenant improvement or other work performed by landlord), the leased premises is in compliance with the requirements of the ADA.

Conclusion

Attorneys representing commercial landlords or tenants that are categorized as covered entities should be mindful of the 2010 Standards and ADA requirements generally in negotiating and drafting leases. Specifically, we need to address with our clients, as early as possible, the current condition of the leased premises and common areas, any improvements anticipated to be made within the premises, and who is responsible for insuring compliance with the ADA requirements for such current condition and any improvements, including the common area, on an ongoing basis. We should also advise our clients to obtain assurances from their other advisers, such as building inspectors, architects and contractors, that they are familiar with the current ADA requirements and that any construction or alteration be in compliance with the new 2010 Standards.

In sum, we must be certain that we have a meaningful discussion with our clients regarding ADA responsibilities, and that they understand their responsibilities and the costs involved therewith. While drafting is always important to reflect the parties' mutual agreement and understanding ' here, because the parties will need to implement the language after the lease is signed ' it is especially important to counsel the client and provide enough information and guidance to permit the client to make a well-informed decision with regard to these provisions and the work and cost that will be involved.

H. Jill McFarland is an associate in the corporate department of the St. Louis office of Lewis, Rice & Fingersh, L.C. Ms. McFarland's practice consists of general corporate matters with an emphasis on real estate and health care.

Effective March 15, 2012, compliance with the Department of Justice's (DOJ) 2010 ADA Standards for Accessible Design (2010 Standards) was required for any alterations to existing facilities subject to the Americans with Disabilities Act (the Act or ADA) and barrier removal. Prior to such date, for the period between Sept. 15, 2010 and March 15, 2012, tenants and landlords were afforded a safe harbor under which an option of complying with the 1991 Standards or the 2010 Standards as to new construction or alteration of existing facilities was available. For a general overview of the revisions to the ADA regulations and the 2010 Standards and their effect on both public accommodations and state and local government entities, please refer to “The DOJ's New ADA Regulations and Accessibility Guidelines” by George J. Kroculick, Andrea M. Kirshenbaum and Jennifer Perry, published in the January 2011 edition of Commercial Leasing Law & Strategy. The purpose of this article is, in light of these new regulations, to revisit the general responsibilities of landlords and tenants under the Act, and offer a few practical considerations in drafting provisions and counseling clients regarding the allocation of responsibilities, as between the landlord and tenant, under the ADA.

The Act

An entity that owns, leases, leases to or operates a place of public accommodation has Title III obligations under the Act (42 U.S.C. ' 12182(a) (emphasis added)), and is, therefore, an entity covered under the Act or a “covered entity” as later referred to herein. “Public accommodations” are entities that are private and have operations that affect commerce and fall into one of the 12 statutorily defined categories. 42 U.S.C. ' 12181(7). Examples of places of public accommodations include:

hotels and other places of lodging; restaurants, bars; theaters, stadiums and other places of entertainment or public gathering; stores and shopping centers; laundromats, dry cleaners, banks, professional offices and other service establishments; public transportation stations; museums, libraries; parks, zoos; private schools; day care centers, shelters; and gyms, spas and other places of exercise or recreation.

Id. As is clear from the text of the Act and the regulations promulgated thereunder, both landlords (and sublandlords) and tenants (and subtenants) of places of public accommodation are covered entities and therefore must comply with all ADA Title III requirements applicable to the place of public accommodation. 28 C.F.R.
' 36.201(b). This is not new based on the DOJ's recent revisions; however, it is important to understand in drafting leases and subleases for use and operation and the responsibilities of the parties to such agreements relative to the requirements of the ADA. The legislative history provides an explanation:

The owner of the building which houses the public accommodation, as well as the owner or operator of the public accommodation itself, has obligations under this Act. For example, if an office building contains a doctor's office, both the owner of the building and the doctor's office are required to make readily achievable alterations. It simply makes no practical sense to require the individual public accommodation, a doctor's office for example, to make readily achievable changes to the public accommodation without requiring the owner to make readily achievable changes to the primary entrance to the building.

H.R. Rep. No. 101-485 (III) at 55-56, reprinted at 1990 U.S.C.C.A.N. 478-79. See also H.R. Conf. Rep. No. 101-596 at 1990 U.S.C.C.A.N. 565, 585 (the Senate accedes to House version).

As stated above, as of March 15, 2012, all altered facilities that are public accommodations must comply with all of the requirements in the 2010 Standards. “An alteration is a change that affects usability of a facility. For example, if during remodeling, renovation or restoration, a doorway is being relocated, the new doorway must be wide enough to meet the requirements of the ADA Accessibility Guidelines.” U.S. Dept. Of Justice, Civil Rights Division, Disability Rights Section, “Title III Highlights,” available at www.ada.gov/t3hilght.htm. As always, the ADA does not include exceptions or grandfather provisions exempting older commercial properties, or ones that have not been renovated, from barrier removal. Discrimination constituting a violation under the Act includes “a failure to remove architectural barriers, and communication barriers that are structural in nature, in existing facilities ' where such removal is readily achievable.” 42 U.S.C. ' 12182(b)(2). Whether the removal of access impediments is “readily achievable” takes into account a number of factors including the total financial resources of both the commercial tenant and the property owner or landlord, and even their parent companies. 42 U.S.C. ' 12181(9); 28 C.F.R. ' 36.104.

Allocation of Responsibility

A commercial landlord and tenant are clearly permitted to allocate responsibility for compliance with the ADA in their lease. 28 C.F.R. ' 36.201(b). However, any such allocation would be effective only as between the parties. Id. (emphasis added). The DOJ expressly echoes this in its Technical Assistance Manual, and its guidance is consistent with the unambiguous language of the statute.

ILLUSTRATION: ABC Company leases space in a shopping center it owns to XYZ Boutique. In their lease, the parties have allocated to XYZ Boutique the responsibility for complying with the barrier removal requirements of title III within that store. In this situation, if XYZ Boutique fails to remove barriers, both ABC Company (the landlord) and XYZ Boutique (the tenant) would be liable for violating the ADA and could be sued by an XYZ customer. Of course, in the lease, ABC could require XYZ to indemnify it against all losses caused by XYZ's failure to comply with its obligations under the lease, but again, such matters would be between the parties and would not affect their liability under the ADA.

TAM ' III-1.2000, available at www.ada.gov/taman3.html. Covered entities are not permitted to disclaim responsibility for violations of the ADA. The legislative history of 42 U.S.C. ' 12182(b)(1)(A)(i) makes it clear that a covered entity cannot use a contractual provision to reduce its liability under the Act, because a covered entity's legal obligation extends to individuals in their status as customers or clients of the legal entity, and is not based on any such individual's status as a client or customer of other entities that are public accommodations. H.R. Rep. No. 101-485 (II) at 104, reprinted at 1990 U.S.C.C.A.N. 387. “A public accommodation's obligations are not extended or changed in any manner by virtue of its lease with the other entity.” Id.

Landlords and tenants remain liable to third parties for compliance, so a disabled person that is discriminated against (Claimant) may successfully sue both the landlord and tenant of the discriminating business for the Title III ADA violation. If a lease expressly states that “the tenant is solely responsible for compliance with the Act and any regulations promulgated thereunder as to the leased premises; landlord shall have no liability for compliance with such laws,” the landlord would remain liable to Claimant with regard to a violation in the leased premises, because that person's rights are not impacted by the terms of the lease. Independent Living Resources v. Oregon Arena Corp. , 982 F. Supp 698, 767 (D. Or. 1997). By contrast, if the landlord was held liable to Claimant, the landlord's ability to recoup any amounts paid to Claimant from the tenant depends upon the existence and terms of the indemnification provision in the lease.

Often, lease language allocating responsibility among the parties states that the landlord is responsible for ADA compliance as to common areas serving the leased premises that is the public accommodation, and the tenant is responsible as to such leased space. Consider the sample language set forth below.

Compliance with Disabilities Law. Notwithstanding anything herein to the contrary, as between Landlord and Tenant, (i) Tenant shall bear the risk of complying with Title III of the Americans with Disabilities Act of 1990, any state or local laws governing handicapped access or architectural barriers, and all rules, regulations, and guidelines promulgated under such laws, as amended from time to time (the “Disabilities Acts”) in the Premises, and (ii) Landlord shall bear the risk of complying with the Disabilities Acts in the common areas of the building, other than compliance that is necessitated by the use of the Premises as a result of any alterations or additions, including any initial tenant improvement work, made by or on behalf of Tenant (which risk and responsibility shall be borne by Tenant).

Drafting Considerations

The effectiveness of the new 2010 Standards is a good reason to revisit lease provisions regarding the ADA. Consider the new 2010 Standards in negotiating and drafting the same and in counseling your clients. The following include certain of these considerations to discuss with your clients and keep in mind when drafting lease provisions relating to compliance with the ADA and other disability laws and regulations and any related indemnification:

• A general provision that requires the tenant to comply with all applicable laws only requires a tenant not to violate the law within the areas that are leased and would not necessarily obligate a tenant to go above and beyond and make structural improvements to the leased premises to comply with the ADA. David Warren Peters, “Who's Responsible for ADA Compliance ' Landlords or Tenants?, Real Estate Issues, Summer 2004.
• A tenant's obligation to undertake all necessary work to maintain ADA compliance would not extend to areas not exclusively occupied by such tenant, such as common areas, unless expressly provided in the lease. Id.
• Compliance with the ADA only does not ensure compliance with state or local laws that may be more stringent.
• Ambiguously drafted language is generally construed against the drafter, which is often the landlord in commercial leasing.
• Even express allocations of obligations under the ADA between the tenant and landlord will not insulate the other party from third-party claims for non-compliance without an appropriate indemnification provision. Indemnification provisions should be included in the provisions allocating responsibility under the ADA to address breaches under that provision or the general indemnity provision must be broad enough to permit recovery for claims and losses related to ADA claims.
• Consider requiring a landlord representation that as of the effective date of the lease (or completion of any tenant improvement or other work performed by landlord), the leased premises is in compliance with the requirements of the ADA.

Conclusion

Attorneys representing commercial landlords or tenants that are categorized as covered entities should be mindful of the 2010 Standards and ADA requirements generally in negotiating and drafting leases. Specifically, we need to address with our clients, as early as possible, the current condition of the leased premises and common areas, any improvements anticipated to be made within the premises, and who is responsible for insuring compliance with the ADA requirements for such current condition and any improvements, including the common area, on an ongoing basis. We should also advise our clients to obtain assurances from their other advisers, such as building inspectors, architects and contractors, that they are familiar with the current ADA requirements and that any construction or alteration be in compliance with the new 2010 Standards.

In sum, we must be certain that we have a meaningful discussion with our clients regarding ADA responsibilities, and that they understand their responsibilities and the costs involved therewith. While drafting is always important to reflect the parties' mutual agreement and understanding ' here, because the parties will need to implement the language after the lease is signed ' it is especially important to counsel the client and provide enough information and guidance to permit the client to make a well-informed decision with regard to these provisions and the work and cost that will be involved.

H. Jill McFarland is an associate in the corporate department of the St. Louis office of Lewis, Rice & Fingersh, L.C. Ms. McFarland's practice consists of general corporate matters with an emphasis on real estate and health care.