ADA Defense Lawyer on Hotel Mixed Use to Tenants Not Liable for Common Areas
Hotel mixed-use projects have proliferated over the past decade or two — projects that combine a hotel with retail, residential, entertainment, office and other uses. In recent years, many of these projects combine hotel and shopping center elements. We are big fans of hotel mixed-use.
Over the years, we have written about the numerous advantages that accrue to both hotels and shopping centers, when hotels are added to the right shopping or retail center. One study showed that the right hotel can boost gross sales at shopping centers 20% – 40% — and hotels can get 30% – 40% RevPAR advantage over hotels in their competitive set.
But those of you with these hotel in mixed-use projects with shopping centers or other retail elements know that mixed-use projects inject numerous additional legal and business issues that hoteliers usually don’t deal with in stand-alone hotel projects. One such critical issue is that of “common areas.”
In the article below, my partner, Marty Orlick, writes about one aspect of common area liability that you may have overlooked in defense to ADA violations. Of course, the ultimate analysis will depend on the precise facts of the situation at hand and the structure of the hotel’s participation in the mixed-use project – particularly whether or not the hotel is owned in fee or is a tenant in the project.
How many judges does it take to rule that shopping center tenants are not liable for ADA violations in common areas? – By Marty Orlick
First published in the October 2015 issue of the California State Bar’s Real Property Law Section E-Bulletin
Congress passed the Americans with Disabilities Act of 1990 (“ADA”) “to provide clear, strong consistent, enforceable standards addressing discrimination against individuals with disabilities” in employment, public accommodations, transportation and federal, state and local government services. 42 U.S.C.§12101(b)(2). Title III of the ADA applies to public accommodations including shopping centers, theaters, arenas, restaurants, health clubs, hotels, banks, public space in office buildings, and nearly every manner of retail premises. Virtually every leased location which serves the general public and is engaged in commerce is subject to the accessibility requirements of the ADA.
The Americans with Disabilities Act Accessibility Guidelines (“ADAAG”) were developed in the early 1990s by the Access Board and implemented by the Department of Justice (“DOJ”), the federal agency responsible for enforcing the ADA. The ADAAG Standards were amended effective March 15, 2012.
The DOJ has been actively investigating national retailers for ADA compliance. In addition to voluntary compliance and federal enforcement, the ADA contemplates that private litigants will enforce ADA compliance. To that end, federal court filings demonstrate that since 2000, more than 20,000 ADA private lawsuits have been filed in the federal courts. Over 8,000 ADA lawsuits have been filed in California’s federal district courts during this time period. From September 2012 through December 2013, 627 federal cases, 2,078 state cases and 342 demand letters were submitted to the California Commission on Disability Access. See 2013 Annual Report to the California State Legislative in Compliance with Government Code Sections 8299.07(a) and 8299.08(d). The overwhelming majority of these ADA lawsuits and compliance demands involved owners and tenants of leased properties.
Section 28 C.F.R. 36.201 provides that both the landlord who owns the building that houses a place of public accommodation and the tenant who operates the business in the building are jointly and severally liable to the disabled plaintiff. That section further provides that the landlord and tenant may allocate in their lease “responsibility” for complying with the ADA. In Botosan v. Paul McNally Real Estate, 216 F.3d 827 (9th Cir. 2000), the Court of Appeals held that the “ADA imposes concurrent obligations on landlords and tenants, and that a landlord, as an owner of the property, should be liable for ADA compliance even on property leased to, and controlled by, a tenant.” See id. at 832–34. ADA lawsuits typically name both the property owner and the tenant, making clear and careful drafting of Compliance with Laws, Alterations and Indemnification lease clauses all the more important.
Case in point: Kohler v. Bed Bath & Beyond of Cal., LLC, 780 F.3d 1260 (9th Cir. 2015).
In an opinion published March 2015, the Ninth Circuit Court of Appeals decided a case of far-reaching importance to landlords and retail tenants. The Court affirmed a lower court decision that the nation’s leading housewares retailer was not liable for alleged violations of the ADA within its store or in a portion of the common area parking lot in front of its store. Plaintiff sued a regional shopping center owner and a principal tenant for alleged ADA violations within the store and the shopping center’s common areas generally serving the store. We successfully moved for summary judgment on the grounds that the tenant’s lease conveyed to the tenant a non-exclusive right to use the shopping center’s common parking facilities. The lease gave the landlord complete control over the common areas, and required the landlord to maintain same in a first class condition. The plaintiff argued that the tenant controlled the common area parking, evidenced by the fact that the tenant paid into a common maintenance fund. In granting Defendant’s summary judgment motion, the trial court rejected the plaintiff’s arguments and dismissed the case. Plaintiff appealed to the 9th Circuit Court of Appeals which, 3 years later, held that the ADA does not impose “upon tenants liability for ADA violations that occur in those areas exclusively under the control of the landlord.”
What this means for landlords and tenants is that there should be fewer lawsuits against shopping center tenants for violations of the ADA that occur in common areas. Nor can landlords expect to pass liability for ADA violations in common areas to their tenants. After Kohler, it is unlikely that cases alleging ADA violations in shopping center common areas will be filed against retailers. However, careful lease drafting is essential to clearly identify who is responsible for ADA Compliance.