Alan Nochumson and Natalie Klyashtorny were each named by Philadelphia Magazine as a Pennsylvania Super Lawyer Rising Star.
The objective of the Super Lawyers selection process is to create a credible, comprehensive and diverse listing of outstanding attorneys that can be used as a resource to assist attorneys and sophisticated consumers in the search for legal counsel. Only 2.5% of the best up-and-coming attorneys in the state are named to the Rising Stars list.
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Prior to purchasing a commercial property, it is extremely important to perform due diligence which should go beyond reviewing the advertising and other promotional materials generated by the seller about the property.
The U.S. Court for the Eastern District of Pennsylvania in Schutter v. Herskowitz reaffirmed that principle when it concluded that a purchaser’s assumptions from such type of materials cannot be grounds for a lawsuit against the seller of the property if those assumptions were not actually directed by the seller to the buyer at the time the agreement of sale was entered into by the parties or even included as a term within the written agreement itself.
In late 2005, Stephen Schutter spoke with David Herskowitz, the owner of a hostel located in the Old City section of Philadelphia, about purchasing the hostel, according to the opinion.
Schutter, after reading a Washington Post article mentioning the hostel and information posted on the hostel’s website describing the hostel, believed that the hostel operated with a capacity of 70 beds, as stated in the opinion. However, Schutter never directly inquired into the hostel’s bed capacity nor did Herskowitz make any representations directly to him regarding the bed capacity.
Schutter decided to purchase the hostel with the understanding that the hostel was allowed to operate with 70 beds. Schutter then engaged a real estate broker to assist him in drafting the agreement of sale, among other things, the opinion said.
The agreement between Schutter and the real estate broker did not specify who was responsible to pay the real estate broker for his services and under what terms. However, their written agreement did mention that the transfer of the property was for a hostel with a 70-bed capacity. Herskowitz was not furnished with a copy of the agreement between Schutter and the real estate broker during while the agreement of sale was being drafted, according to the opinion.
The parties eventually executed the agreement of sale which was drafted by the real estate broker which did not condition the sale of the hotel on its bed capacity. In accordance with the terms of the agreement of sale, Schutter placed a deposit of $100,000 into an escrow account controlled by the real estate broker. However, soon after the agreement of sale was finalized, Schutter discovered that the hostel was only authorized for the use of 54, not 70, beds, according to the opinion.
Schutter promptly contacted Herskowitz and they both agreed to terminate the agreement of sale and for the real estate broker to return the escrowed funds back to Schutter.
The real estate broker then prepared a formal release which included, among other things, payment of $12,000 by Schutter to the real estate broker for services rendered. Because Schutter refused to sign the release, due to the inclusion of the real estate broker’s fee, the real estate broker did not return the $100,000 deposit back to Schutter. Schutter then filed suit not only against the real estate broker but also against Herskowitz.
At the summary judgment stage, the federal district court dealt with Schutter’s causes of action asserted against Herskowitz for fraudulent inducement to contract and fraudulent misrepresentation.
In the fraudulent inducement claim, Schutter alleged that Herskowitz made material misrepresentations to him regarding the bed capacity for the purpose of inducing him into entering into the real estate transaction. Similarly, in the fraud and misrepresentation claim, Schutter alleged that Herskowitz falsely induced him into tendering the escrow funds through false and fraudulent misrepresentations regarding the bed capacity.
Schutter, attempting to overcome summary judgment, claimed that Herskowitz represented that the hostel operated with a 70-bed capacity by advertising the property as a 70-bed hostel on the hostel’s website and through an article in the Washington Post posted on the website which referred to the hostel as including 70 beds.
The federal district court flatly rejected Schutter’s reliance on the Washington Post article because that article was written after, not before, the agreement of sale was signed by him. Regardless, the federal district court believed that the article was not a representation made by Herskowitz but rather a general circulation piece about youth hostels in the mid-Atlantic region.
Addressing the website content, the federal district court found that the brief description of the hostel, which did mention the 70-bed capacity, was not associated in any way with an offer to sell the property to Schutter and was referenced on the website for general information purposes only.
Relying on the parol evidence rule, the federal district court then placed down the proverbial hammer onto the fraudulent inducement claim.
In Pennsylvania, under the parol evidence rule, in the absence of fraud, accident or mistake, a plaintiff is precluded from offering evidence to explain or vary the terms of a written contract which includes an integration clause.
The federal district court emphasized that the agreement of sale contained an integration clause which expressly set forth that all of the terms agreed to by the parties were set out in the agreement itself and pointed to another portion of the agreement which specifically warned that any advertising or promotional activities made by Herskowitz was not a part of the agreement unless specifically acknowledged in the agreement itself.
In opposing the summary judgment motion, Schutter attempted to argue that, unlike the typical seller fraud situation, the fraudulent inducement claim did not arise from a physical characteristic of the property but as to the legality of the business operation. In other words, Schutter was upset that the hostel could not support the 70 beds to which he intended to operate.
The federal district court rejected Schutter’s attempt to widen the scope of the exception to the parol evidence rule. Instead, the federal district court, in strictly applying the parol evidence rule and thus reviewing the terms of the agreement of sale, did not find any provision in the agreement itself specifically addressing the number of permitted beds in the hostel.
Moreover, the federal district court noted that even Schutter did not allege that he believed that the 70-bed requirement was included within the four corners of the written agreement of sale. The federal district court implied that, had such an allegation been made by Schutter, the fraudulent inducement claim would have survived beyond the summary judgment stage.
The federal district court then addressed Schutter’s assertion that Herskowitz fraudulently and falsely induced him into entering the agreement through certain omissions regarding the bed capacity.
According to the “Restatement (Second) Torts,” a contracting party has a duty to disclose facts that are basic to the transaction if he knows that the other party is about to enter into the contract with a misunderstanding of those facts and, based on the relationship between the parties, the customs of trade or other objective circumstances, if those facts are reasonably expected to be disclosed.
The federal district court stated that a fact is considered a “basic” fact when that fact goes to the basis or the essence of the transaction and is an important part of the substance of what is being bargained for or dealt with.
Schutter alleged that the bed capacity was a basic fact that Herskowitz was obligated to disclose. In doing so, he, among other things, pointed out that Herskowitz agreed to terminate the agreement once he discovered that the bed capacity was not 70.
The federal district court was not persuaded that the bed capacity was a fact basic to the transaction and instead bluntly pointed to the inclusion of the integration clause in the agreement of sale, thereby dismissing the relevance of any conversations between the parties prior to the execution of the agreement or any conduct by the parties afterwards. According to the federal district court, under the agreement of sale, Schutter clearly assumed the risk of any legal limitations encumbering the property or its use.
LESSONS LEARNED
The federal district court’s ruling in Schutter illustrates why a potential purchaser must remain cautious prior to entering into an agreement of sale.
If Schutter had asked the right questions prior to its execution of the agreement, he would not have even had to retain the services of the real estate broker because he would have agreed to purchase the hostel in the first place and would thus not have tied up $100,000 of his money in the process.
Even if Schutter did not perform his due diligence as to the bed capacity of the hostel prior to agreeing to purchase the hostel, if that “basic” fact was important enough to him, he should have conditioned the purchase of the hostel on a 70-bed capacity, which he did not.
All is not lost for Schutter. In the lawsuit, he still maintains a cause of action against the real estate broker for breach of fiduciary duty. At worst, the $100,000 in escrow should be set off from the amount Schutter owes to the real estate broker, if any. The question remains, however, whether the federal district court will hold the real estate broker monetarily liable for refusing to return the escrowed funds to Schutter because of a pending payment dispute between them. The federal district court could very well impose a monetary judgment against the real estate broker and in favor of Schutter for punitive damages and lost profits suffered by Schutter if he can show that he was unable to enter into other profitable business ventures because he did not have access to the escrowed funds.
Reprinted with permission from the October 27, 2008 edition of The Legal Intelligencer © 2008 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
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Residents of a planned community are subject to the rules and regulations of a homeowner’s association which attempts to police the interactions between the residents in the planned community.
In McMahon v. Pleasant Valley West Association, the Commonwealth Court, however, refused to hold an association liable for failing to protect a resident in the community from being attacked by dangerous dogs owned by other residents in the community.
THE BITE
In McMahon, a couple owned two pit bulls in a planned community located in Jim Thorpe, Pa.
After the roommate of the owner of the adjacent property complained at a meeting of the association’ board of directors that the pit bulls were terrorizing other residents in the planned community, the association ordered the couple, in writing, to confine the pit bulls to their property and otherwise to keep the dogs on a leash as required by its rules and regulations in effect at that time.
Several months later, the adjacent owner was standing in his driveway loading his car when he was attacked and injured by the dogs. The dogs were unleashed and ran directly from the couple’s property onto the adjacent property.
THE LAWSUIT
Shortly thereafter, the adjacent owner filed suit against the association, among others, under a negligence theory for the injuries he allegedly suffered during the attack.
At the trial court-level, the association filed a motion for summary judgment seeking dismissal of the lawsuit primarily on the grounds that the association lacked any duty whatsoever to implement or enforce rules or regulations concerning the behavior of the dogs while they were located on the couple’s private property.
The trial court thus had to decide whether an association which has the power to regulate animals within its community, but elects not to do so, has a duty to protect residents within the community against dangerous dogs owned by other residents.
The trial court noted that several other jurisdictions have recognized an association’s duty to exercise due care for its residents’ safety in areas under its control and that some of these jurisdictions have held that a dangerous condition includes the presence of a vicious dog where the association has knowledge of the dog’s dangerous propensities and a right or duty to control the dog’s presence.
Nevertheless, the trial court refused to find such a duty and entered summary judgment in the association’s favor and against the adjacent owner.
The trial court first noted that the “[a]ssociation did not own, control or manage the dogs, the property where they were kept, or the premises where the alleged attack occurred.”
Next, the trial court openly questioned whether the association had the right to remove the couple and their dogs from the planned community. The trial court reiterated that, at most, the association had the authority, through Pennsylvania’s Uniform Planned Community Act and the association’s governing documents, to regulate the couple’s behavior in maintaining the dogs solely through written warnings, fines, or restrictions on the use of the common facilities. The trial court reiterated that the association did not possess the right to remove the couple or their dogs from the planned community.
The adjacent owner then appealed the trial court’s ruling to the Commonwealth Court.
The Commonwealth Court reviewed the affirmative duties owed by a homeowners’ association to its residents as summarized by the “Restatement (Third) of Property (Servitudes).”
According to the “Restatement,” an association owes the following affirmative duties to its residents: to use ordinary care in managing the community under its control; to treat its residents fairly; to act reasonably when exercising its discretionary powers and in making and enforcing its rules; and to provide its residents with reasonable access to information about the association, the common property, and the financial affairs of the association.
The Commonwealth Court found the duty suggested by the adjacent owner was not supported by the “Restatement.” In doing so, the Commonwealth Court stressed that any such duty on the part of the association was limited to policing the conduct of the couple and their dogs in the common elements of the planned community, not on their private property.
The Commonwealth Court also rejected the adjacent owner’s attempt to create a private cause of action under Pennsylvania’s Dog Law.
The Dog Law provides that it is the duty of every police officer, State dog warden, employee of the Department of Agriculture or animal control officer to seize and detain any dog which is found running at large upon the property of an individual other than the owner of such dog and unaccompanied by the owner.
The Commonwealth Court concluded that, even if the association had a duty to report the pit bulls under the Dog Law, the state legislature did not intend to create a private action for violations of the statute.
LESSONS LEARNED
The Commonwealth Court’s ruling in McMahon really shows how limited associations are in policing planned communities. While associations theoretically serve as a quasi-government function for residents, they ultimately lack the power to police beyond the common elements.
As explained by the Commonwealth Court, even in the common elements, associations are somewhat powerless in effectuating justice. In McMahon, the Commonwealth Court pointed out that the association lacked the authority to physically remove the couple or their dogs from the planned community. The reason is simple – they owned their property. The result in McMahon may have been different if the couple leased their property. Under that scenario, the owner of the property may have been forced by the association to evict the troublesome tenants. By owning the property, however, the best the association in McMahon could do was to fine the couple and, if they failed to pay, to foreclose on the debt then owed on the property, a rather costly endeavor for an entity which probably has limited funds to begin with.
Reprinted with permission from the September 29, 2008 edition of The Legal Intelligencer © 2008 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
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Purchasing a home is one of the largest investments an individual makes in his lifetime. In order to make a sound investment, he should thus inquire into anything that may objectively and subjectively affect his decision to purchase the property.
A recent decision handed down by the Pennsylvania Court of Common Pleas for Beaver County in Bukoskey v. Palombo shows how imperative it is for an interested homebuyer to ask the right questions prior to signing an agreement of sale.
BACKGROUND
In Bukoskey, the property owner had committed suicide and the property was being sold by her estate. At no time during the marketing of the property did the estate or the real estate agents involved with the real estate transaction mention that the property owner died after she shot herself in the master bedroom of the house.
When the subsequent purchaser visited the property prior to signing the agreement of sale, the master bedroom was filled with furniture and the floor was obstructed from view.
On the day of closing, the purchaser arranged for a final walk-through of the property. At the time of the walk-through, the furniture in the master bedroom had been removed and a piece of carpeting that was of the same color and material as the carpeting in the master bedroom was covering the bloodstained floor.
The day after the closing the now new property owner learned about the suicide through a neighbor and then discovered the bloodstain on the carpeting in the master bedroom. Soon thereafter, he hired a company to professionally clean the carpeting in the master bedroom in an effort to remove the bloodstain. When he was informed that the bloodstain could not be so removed, he sought to void the sales agreement.
When the estate refused to do so, the new property owner filed suit against the estate as well as the real estate agents representing both the estate and him. The estate and the real estate agents then filed preliminary objections to the complaint.
CLAIMS AGAINST THE ESTATE
The new property owner claimed that the former owner’s suicide in the house was a material defect in the property that required disclosure by the estate under Pennsylvania’s Real Estate Seller Disclosure Law, or RESD.
Under the RESD, an owner listing a property for sale must disclose known material defects of the physical aspects of the property which may affect title or otherwise interfere with the use and enjoyment of the property.
In order to determine if a suicide requires mandatory disclosure under the RESD, the Court looked to Superior Court of Pennsylvania’s ruling in Colaizzi v. Beck for guidance.
In Colaizzi, after the closing, the new property owner realized that he lived across the street from a home for mentally challenged adults. The Superior Court held that the new property owner was not entitled to recovery under the RESD because the disclosure requirements do not extend beyond the property which is subject to the transfer.
The Superior Court in Colaizzi also refused to hold the former property owner liable simply for failing to mention the existence of the group home to the new property owner prior to the closing.
In Pennsylvania, a seller or his agent may be responsible for concealing the existence of an imperfection in the property which is known to be material to the purchase. In Colaizzi, the Superior Court noted that there was no evidence that the real estate agent or the former property owner were aware that the new property owner did not want to live near a group home.
Applying the Superior Court’s line of reasoning in Colaizzi, the trial court in Bukoskey found that a suicide did not amount to a material defect under the RESD which had to be disclosed.
Furthermore, the trial court in Bukoskey pointed out that the new property owner could not establish that the estate knew that the former property owner’s cause of death was material to his decision to proceed forward with real estate transaction.
The trial court actually admonished the new property owner for not inquiring into the cause of death in light of the involvement of an estate as part of the property transfer.
CLAIMS AGAINST THE REAL ESTATE AGENTS
The new property owner also believed that the real estate agents were aware of or should have been aware of the former property owner’s suicide and should have thus disclosed that information to him prior to the purchase.
The trial court disagreed based upon the same reasoning enunciated in its dismissal of the RESD claim against the estate.
The trial court then addressed the merits of the intentional misrepresentation and concealment claims. In Pennsylvania, a real estate agent may be liable if he intentionally fails to disclose latent defects with a residential property or intentionally prevents the prospective purchaser from acquiring material information about the property.
The trial court concluded that neither of those claims could survive because they were based upon the flawed premise that the suicide (or the lack thereof) was a material factor in the new property owner’s decision to purchase the house in the first place.
Next, the trial court considered the new property owner’s claim that his real estate agent breached its warranty for not upholding the “100% money back guarantee.” Because the new owner failed to provide any factual basis to demonstrate that any specific promises regarding a guarantee made by the real estate agent became the basis of the bargain for the real estate transaction, and since he failed to expressly plead the existence of this guarantee in the complaint itself, the trial court allowed him to amend the complaint accordingly.
The trial court finally determined the merits of the Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, or UTPCPL, claim. In the complaint, the new property owner alleged that the real estate agents engaged in unfair trade practices by purposely concealing the bloodstain on the carpeting, for not disclosing the manner of death under the RESD, and for failing to honor the “100% money back guarantee.”
Under the UTPCPL, an individual who purchases a residential property may bring a private action to recover damages caused by “another’s act or practice declared unlawful by the” UTPCPL.
The trial court reiterated that, since the estate did not have a duty to disclose the prior property owner’s suicide, neither did the real estate agents.
As for the carpeting, the trial court noted that covering up a bloodstain does not rise to the level of representing that the house itself was “of a certain standard, quality or grade”, as alleged in the complaint, and that the carpeting could be replaced.
Citing the Superior Court’s ruling in Sewak v. Lockhart, the trial court stated that the new property owner failed to set forth elements demonstrating a prima facie case for common law fraud and thus could not recover under the “catchall” provision of the UTPCPL as he attempted to do in the complaint.
This portion of the trial court’s ruling may be problematic for the real estate agents, in that the Sewak decision was rendered prior to the enactment of the amendments to the UTPCPL. Since then, the scope of the “catchall” provision has been expanded to prohibit “fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” The cited language clearly demonstrates a lower standard of proof than common law fraud. Several federal district courts interpreting the cited statutory provision have similarly found that a plaintiff is not required to establish the elements for common law fraud. In a footnote in Bukoskey, the trial court asserted that “until the Superior Court changes the rule, we are bound to follow it.”
LESSONS LEARNED
The trial court’s ruling in Bukoskey just reiterates the earlier point – a purchaser of real estate must perform due diligence by asking the right questions prior to signing on the dotted line.
With the existence of the estate, the purchaser in Bukoskey was clearly placed on notice that the former property owner had died. The purchaser thus had little excuse not to ask the cause of death prior to executing the agreement of sale. If that would have happened, he could have made an informed decision whether or not to proceed forward with the real estate transaction at all or to perhaps place a lower offer with the estate as a result of the personal discomfort of living in a house where a suicide took place.
Reprinted with permission from the August 25, 2008 edition of The Legal Intelligencer © 2008 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
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In a recent decision handed down by the U.S. District Court for the Western District of Pennsylvania, a municipality recently withstood a constitutional challenge to an ordinance which requires landlords to disclose the complete names and addresses of their tenants.
In 2007, Oil City, which is located in the foothills of the Allegheny Mountains, enacted an ordinance to provide for the “uniform and equitable collection of earned income.” In order to achieve its purpose, the city mandated that landlords prepare a report which contained the complete name and address of each tenant who was eighteen years of age or older. If a landlord did not comply with the city ordinance, the city could impose a civil penalty on the violating landlord.
Two such landlords eventually filed suit against the city in federal court in the Western District of the Commonwealth in the case captioned Lopez v. City of Oil City. In their complaint, the landlords asserted multiple violations of the U.S. Constitution, among other things.
EQUAL PROTECTION CLAUSE
The landlords first claimed that the city ordinance violated the 14th Amendment of the Constitution because the ordinance denied them equal protection of the laws.
The Equal Protection Clause prohibits state and local governments from statutorily classifying groups and individuals in such a way as to disadvantage a suspect class or impinge upon a fundamental right unless the purpose of the classification is narrowly tailored to further a compelling governmental interest. When dealing with only quasi-suspect classifications, the purpose of the law must be merely substantially related to an important governmental interest. If no suspect class or quasi-suspect class is present and a fundamental right is not burdened, then a state or local government may create a classification as long as it is rationally related to a legitimate governmental interest.
Although landlords and tenants are not, by themselves, considered members of a suspect class, the landlords in Lopez nonetheless argued that the city ordinance required a heightened standard of review. They claimed that the ordinance infringed upon a fundamental right – the right to privacy and the right to establish a home. In particular, the landlords in Lopez contended that the ordinance burdened an individual’s right to keep the activity in their home private.
The court in Lopez found the ruling in Berwick Area Landlord Association v. Borough of Berwick to be instructive. In Berwick, the municipality, in order to protect the public health, enacted legislation which required landlords, among other things, to produce floor plans, names and addresses of their tenants, and permit annual inspections of the rental properties.
Although the court in Berwick recognized the fundamental right to establish a home, it found the comprehensive requirements of the statute did not burden that fundamental right. Rather, in Berwick, the court noted that the statute, while regulating the ownership of rental properties, did not “explicitly or effectively ban all residential properties.”
Applying the reasoning from Berwick, the court in Lopez did not believe that the disclosure of names and addresses of tenants equated to disclosing an activity in the household. In doing so, the court applied the rational basis test to each of the landlords’ claims under the 14th Amendment.
The court explained that the stated purpose of the ordinance – to provide for the “uniform and equitable collection of earned income” – was applied equally and did not single out tenants. As the court pointed out, although the identity of property owners is readily available, renter information is harder to determine. The court thus concluded that the ordinance rationally attempts to determine the identity of the tenants who may be below the tax radar.
DUE PROCESS CLAUSE
The landlords also argued that the city ordinance violated the Due Process Clause of the 14th Amendment of the Constitution.
The Due Process Clause consists of substantive and procedural components. The substantive component bars the infringement of those fundamental rights which are deeply rooted in our society.
In Lopez, the landlords claimed that their right to privacy was infringed upon because the city ordinance required them to disclose the names of addresses of the tenants. The federal district court pointed out, since the city ordinance only requires the disclosure of tenant information, any constitutional claim would be analyzed through the eyes of the tenants, not the landlords.
When considering protecting an individual’s privacy interest in disclosing personal matters, the court reiterated that it is crucial to weigh the individual’s right to privacy with the public interest. The court found that the collection of taxes is an important and basic public necessity that outweighs the nominal intrusion created by the ordinance.
The court then determined whether the procedural component of the Due Process Clause was violated.
Under the Due Process Clause, a law must be drafted in such a way that an individual with common intelligence will be able to understand the law. Civil statutes, as opposed to criminal statutes, are given more leeway when attacked facially and are only invalidated when the statute is vague in all of its applications.
The landlords in Lopez claimed that the term “residing” was not defined in the ordinance and, therefore, it was unclear which individuals the landlords needed to report to the city. For instance, they were unsure if overnight guests counted as residents under the ordinance.
The court in Lopez, applying common sense and the definition from Webster’s Dictionary, determined that the term “resident” did not include transitory visitors and thus was not unconstitutionally vague.
FOURTH AMENDMENT
Next, the court addressed whether the disclosure of tenant information violated the Fourth Amendment of the Constitution by authorizing unreasonable searches and seizures. The underlying basis for the Fourth Amendment is to protect individuals from arbitrary governmental invasions. In order for there to be a governmental invasion, there must be a reasonable expectation of privacy.
The court flatly rejected the landlords’ Fourth Amendment claim out of hand because, neither through the complaint nor during testimony, did the landlords even attempt to clarify how the statutory disclosure constituted a “search” or “seizure” within the meaning of the Fourth Amendment.
IMPAIRMENT OF CONTRACTUAL RELATIONSHIPS
The court lastly addressed whether the city ordinance impaired existing contractual relationships in violation of Article I, Section 10 of the Constitution. Under that constitutional provision, a change in state law cannot operate as a substantial impairment of a contractual relationship unless the law has a legitimate and important purpose and the adjustment of the rights to the contractual relationship is reasonable and appropriate in light of that purpose.
In Lopez, the landlords claimed that the city ordinance impaired existing contractual relationships because they would be obligated to spend substantial additional work and money in order to comply with the ordinance – an amount that was not included in the offering price – and that their tenants would have negotiated a different deal if they knew that the city would be furnished with their names and addresses.
The court found no evidence that a landlord would have raised rent or of a tenant seeking lower rent. The court further noted that the effort to fill out a form is so minimal that it could not “impair the contractual relationship, much less substantially so.” Irrespective, the court found that the ordinance had a legitimate and important purpose and that the adjustment of the rights of the parties to the contractual relationship was reasonable and appropriate in light of that purpose.
Reprinted with permission from the July 28, 2008 edition of The Legal Intelligencer © 2008 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
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Alan Nochumson served as a faculty speaker at a Continuing Legal Education (CLE) seminar on Real Estate Purchase And Sale Transactions – How To Do Them Right sponsored by Sterling Education Services, Inc.
During the seminar, Nochumson highlighted the special issues affecting condominiums, planned communities, and homeowners’ associations.
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A landlord is generally not liable for injuries sustained by third parties on his property. The reasoning is simple: Liability is based upon possession and control, not just ownership, of the property.
In Jones v. Levin, the Superior Court of Pennsylvania recently held that a landlord can be held liable for injuries sustained on the property if the landlord either maintains some control over the property or if the property is intended for use by the general public.
Constance Jones was a salesperson at the Levin Furniture Store in suburban Pittsburgh. On a chilly December evening, Jones was walking back to her automobile, parked in an adjacent parking lot, when she fell on some ice that had accumulated in an uneven area of the property. The property on which she fell was owned by the Levin Estate and leased on a month-to-month basis to the family business, Sam Levin, Inc. The stated purpose of the lease was to sell furniture and appliances to the general public through the Levin Furniture Store.
Jones and her husband filed a complaint against the administrator of the Levin Estate. In the complaint, they claimed that the administrator of the Levin Estate was negligent in allowing water run-off, snow and ice to build up in an uneven area of the property, which produced dangerous conditions.
The Levin Estate filed a motion for summary judgment and the trial court granted the motion after finding that the Levin Estate, as landlord, did not owe a duty to Jones.
On appeal, the Superior Court first decided which party controlled the property.
At first glance, it appeared that Sam Levin, Inc., as tenant, was in control of the property. However, the Superior Court questioned whether a genuine landlord-tenant relationship existed between the parties.
Landlord-tenant relationships are not formed with a snap of the fingers. At the crux of any lease is the exchange of money, or some other type of consideration, for possession of the property. In the simplest sense, some sort of benefit must flow to the landlord in order for the landlord-tenant relationship to exist.
With that in mind, the Superior Court found genuine issues of material fact as to whether a landlord-tenant relationship actually existed between the Levin Estate and Sam Levin, Inc. The Superior Court pointed out, that, although the lease provided for the payment of rent from Sam Levin, Inc. to the estate, the record was bare of any indication that the estate was actually receiving these rental payments.
The Superior Court next addressed the two exceptions to the general rule of nonliability of a landlord which is out of possession of the property.
The first exception is known as the “reserved control” exception. Under this exception, a landlord may be liable when and if the landlord reserves control over a defective portion of the property or over a portion of the property that is necessary for the safe use of the property. This exception typically applies to “common areas”, such as hallways in buildings leased to multiple tenants.
The Superior Court noted that the lease suggested that the Levin Estate retained some control over the property. The lease stated that Sam Levin, Inc., as tenant, was responsible for repairs and maintenance but could not make any structural repairs without the consent of the Levin Estate. Therefore, the Superior Court concluded that genuine issues of material fact existed as to whether the Levin Estate continued to exercise control over the defective portions of the property.
The second exception the Superior Court discussed is known as the “public use” exception. According to Section 359 of the Restatement (Second) of Torts, a landlord may be liable to third parties if the property is used by the general public and the owner has failed to inspect or repair the dangerous conditions plaguing the property. The underlying rationale behind this exception is the landlord’s duty to the public, which cannot be shifted to the tenant if the landlord has reason to believe that the public will be admitted prior to a correction of any hazards on the property.
In Pennsylvania, the public use exception is traditionally applied to customers who are injured on the leased premises. Prior to Jones, no court had ever applied the exception to injured employees. The Superior Court cited several jurisdictions, which declined to impose liability on landlords for injuries suffered on their properties by employees or other third parties that were present for work related activities. However, the Superior Court decided to adopt the prevailing law in New York where landlords are liable for injuries to employees if the injuries occurred in an area that was intended for use by the general public.
In doing so, the Superior Court noted that the purpose of public use exception is to protect the public. The Superior Court reasoned that New York’s broader interpretation to be favorable and necessary to provide a higher level of protection and did not find a distinction between injuries that occurred to an employee compared to injuries suffered by the general public if those injuries occurred in an area intended to be used by the general public. The Superior Court believed that “a dangerous condition of land open to the general public is no less dangerous because the party who happens to suffer injury . . . is an employee.”
The Superior Court’s ruling in Jones merely illustrates the importance of landlords being vigilant in inspecting and maintaining their properties. Landlords cannot and should not rely on their tenants to do so. Otherwise, the buck can, figuratively and literally, stop with the landlord.
Reprinted with permission from the June 30, 2008 edition of The Legal Intelligencer © 2008 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.
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Alan Nochumson served as a faculty speaker at the Continuing Legal Education (CLE) seminar sponsored by the Lorman Education Services entitled Landlord and Tenant Law In Pennsylvania.
At the seminar, Nochumson discussed recent developments affecting landlords and tenants in Pennsylvania.
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Natalie Klyashtorny participated in the “Hot Topics for Women In The Workplace” panel discussion at the Philadelphia Bar Association’s Women In the Profession Summit.
Klyashtorny and her co-panelists discussed recent noteworthy legal decisions impacting women in the workplace.
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Natalie Klyashtorny planned and moderated the program entitled “Crafting and Marketing Your Image: What Every Young Lawyer Needs To Know” which was sponsored by the Philadelphia Bar Association’s Young Lawyers Division.
The program included discussions with local marketing, public relations and human resources professionals on how young lawyers can take control and manage their professional image.
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