Update
07.01.2013
Beginning July 1, 2013,
California commercial leases and rental agreements must include a
disclosure regarding whether the property being leased has been
inspected by a Certified Access Specialist (CASp) and, if a CASp
inspection has occurred, whether the property being leased has met all
construction-related accessibility standards under current law. A CASp
refers to any person who has been certified pursuant to Section 4459.5
of the California Government Code. This new lease disclosure
requirement is part of a comprehensive reform package, California Senate
Bill 1186, that was enacted to address concerns about the skyrocketing
number of lawsuits in California alleging violations of
construction-related accessibility requirements. Many such lawsuits in
California have been brought by plaintiffs or lawyers who have engaged
in multiple filings under the Americans with Disabilities Act or
counterpart California laws (together "ADA accessibility lawsuits"),
with news reports indicating that some lawyers have filed hundreds of
such actions throughout the state.
Background
Nearly 40% of the nation’s ADA
accessibility lawsuits are filed in California. Proponents of SB 1186
view this legislation as a means to provide protection to owners and
operators of public accommodations from abusive litigation, while
creating incentives for commercial property owners to make
ADA enhancements to improve accessibility. The law provides that owners
of properties that were inspected by a CASp inspector and met
applicable standards for accessibility may stay ADA accessibility
lawsuits and engage in an early evaluation conference. A property owner
may also be able to argue for greatly reduced minimum statutory damages
(i.e., a reduction from $4,000 to $1,000 per offense) if the alleged
violations are cured within 60 days of the owner being served with a
complaint.
In addition to these accessibility
inspection disclosure requirements, SB 1186 also introduces several
other restrictions to rein in plaintiffs’ lawyers, including a ban on
pre-litigation demand letters that request the payment of money for
construction-related ADA violations and provisions intended to reduce
the likelihood that a plaintiff can generate multiple claims by making
numerous visits to the same business known to have barriers to access.
In addition, the law contains protections for businesses defined as
"small business[es]," including a stay of litigation and the reduction
of statutory damages (even without a CASp inspection) for violations
that are corrected within 30 days of the small business being served
with a complaint.
Lease Disclosure Requirement
California Civil Code Section 1938
(which codifies a portion of SB 1186) provides that "[a] commercial
property owner or lessor shall state on every lease form or rental
agreement executed on or after July 1, 2013, whether the property being
leased or rented has undergone inspection by a Certified Access
Specialist (CASp), and, if it has, whether the property has or has not
been determined to meet all applicable construction-related
accessibility standards pursuant to Section 55.53."
It is important to note that
Section 1938 does not require that a CASp inspection be completed on the
property being leased; rather, it requires disclosure as to whether a
CASp inspection has been completed and, if it has, whether the property
being leased meets the accessibility standards. Civil Code
Section 55.53(f) confirms that a person’s election not to complete a
CASp inspection "shall not be admissible to prove that person’s lack of
intent to comply with the law." This suggests that a statement in a
lease that there has been no CASp inspection would not be admissible in
an ADA accessibility lawsuit.
Practical Considerations
Property owners should consider
performing a property-by-property analysis to determine whether to have a
CASp inspection performed on their property. The decision whether to
get a CASp inspection involves balancing the condition of the property
and the potential extent and cost of addressing any identified barriers
to accessibility against the potential expense of litigation and the
statutory benefits provided by the new law for properties undergoing a
CASp inspection. The timing of obtaining a CASp inspection also may
depend in part on whether redevelopment or property upgrades are
planned, which would allow accessibility improvements to be made in the
normal course of such work.
There is little precedent under the new
law to indicate whether the statutory benefits provided by having a
pre-litigation CASp inspection will actually reduce litigation expense
for owners and tenants. One California court has ruled that the early
evaluation and stay provisions are not applicable to actions under
federal ADA laws. In addition, ADA accessibility lawsuits often identify
specific accessibility barriers relating to parking restrictions, or
similar exterior features, that can be corrected without incurring undue
burden or expense. If the new law does succeed in reducing filings by
serial filers as intended, however, future claims may be more serious
and more difficult to resolve efficiently. Over time, property owners
may be well-advised to work with a CASp inspector to preemptively
identify and address accessibility violations on their property.
A property owner’s decision as to
whether to have a CASp inspection completed on a property should also
take into account the practical benefits of the litigation protections
afforded under the new law if a CASp inspection is completed. The
litigation advantages of having a CASp inspection are limited: the CASp
inspection does not provide a complete defense to a violation of ADA
accessibility requirements but rather gives the owner a stay of
litigation and a settlement conference, along with limitations on
statutory damages in some cases. Such benefits may be of little
practical consequence in ADA accessibility lawsuits brought by serial
filers, which often settle quickly and without formal discovery.
However, if, as noted above, the new law results in only the more
serious lawsuits being brought, the protections offered to a property
owner who completes a CASp inspection may be useful.
Finally, because tenants are also
subject to ADA accessibility lawsuits, tenants may require property
owners to have a CASp inspection completed and accessibility violations
corrected prior to executing a lease or rental agreement. On the other
hand, if no CASp inspection has been completed for the property being
leased, a sophisticated tenant may be reluctant to insist on a CASp
inspection because the landlord may require that the tenant bear at
least a portion of the cost of making any improvements found to be
necessary. If the tenant will be completing the tenant improvements,
landlords will be reluctant to undertake accessibility corrections that
may be subsequently impacted by the tenant improvements. Landlords and
tenants may also more clearly define their respective ADA compliance
obligations in leases. Local real estate market conditions will play a
role in these negotiations between landlords and tenants.
© 2013 Perkins Coie LLP
