Liability

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High-risk tenants, such as liquor and gun stores, pose potential dangers that typical retail businesses don't. But because alcohol and guns are available at limited locations, these high-risk tenants have a captive audience of customers that create a steady income stream, lessening the chances that they will default on rent or move out before the end of their lease terms.

Q An employee of a tenant at the office building I own is suing me for negligence, claiming that my property manager's failure to repair a loose step caused the employee to fall down a stairway, injuring his back and neck. The manager had recently fixed other loose steps on the staircase, but hadn't noticed a problem with the step that later injured the employee. Could I be liable for his accident even though the step had become faulty since the original repairs?

If you don't maintain any control over your property, don't assume that fact will shield you from liability for an accident. It is uncommon for out-of-possession owners to win liability cases with this argument. For example, if you are aware of a dangerous condition or there is an incident of gross negligence at your property, it won't matter that you don't have much to do with day-to-day operations.

You must be aware of the presence of hazardous materials on your commercial property so that you can not only minimize the risks they pose, but also use lease provisions that shift liability for them to your tenant. Before drafting provisions that specify these things, find out exactly what materials on your property are considered “hazardous” under the law. But be prepared: Hazardous materials are defined so broadly that virtually every commercial property—and most likely yours—has at least one.

Struggling retail tenants may be able to blame their business's failure on things like poor sales, inconvenient locations, or unexpectedly high overhead. But occasionally, the owner is blamed for the failure, such as in a recent Maryland case.

With the summer approaching fast, power outages can be a daily occurrence. If the power in your area is shut off, tenants with an axe to grind might try to sue you for any resulting damage to its equipment and business. Or the tenant could argue that it has been “constructively evicted—that is, the power outage in its space was tantamount to an eviction by you—and try to terminate the lease or demand a rent abatement, says Sacramento attorney Thomas F. Stewart.

Almost all leases require commercial property owners to approve the contractors that will be making improvements on the property that owners lease to tenants. Most people who deal in commercial property consider the provision necessary to protect the owner; without it, a tenant could hire an incompetent contractor, resulting in damage to the owner's property.