One Slip Can Cost You Big – The Colorado Premises Liability Act, Part 2

Following the previous blog post concerning the Premises Liability Act, here’s part 2!

multifamilyBecause we know our clients so well, we know what you’re thinking.  You don’t have to worry about premises liability because you have addressed this issue in your lease.  Your lease contains a liability waiver and release.  Almost every lease has a liability waiver.  A liability waiver, also known as an exculpatory clause, is a lease clause that states the landlord and the management company are not liable to the resident for injury to the resident or the resident’s property for any reason, except and unless the property manager is grossly negligent.  Unfortunately, the Colorado Supreme Court in 1996 ruled that liability waivers are unenforceable in residential leases as a matter of public policy.  Accordingly, liability waivers do not bar Premises Liability Act claims.  The rationale for this holding is twofold. First, the Colorado General Assembly has clearly determined that landlord/tenant relations are a matter of public concern.  Second, the courts have found that liability waivers are based on unequal bargaining power.  Specifically, residential tenants have no opportunity to negotiate leases, but rather are presented with such documents on a take-it or leave-it basis.

Does this mean you shouldn’t have a liability waiver in your lease?  Absolutely not.  A strong liability waiver should remain a part of every well-written lease.  Many residents, and even a fair number of attorneys, are unaware that liability waivers in residential leases have been stricken on public policy grounds.  Similar to other lease language, the language might not hold in court, but the language discourages the resident from bringing a lawsuit.  No lawsuit, no liability.  Further, who knows if and when the law might change?  If the law does change, you don’t want to be caught without a liability waiver in your lease.  Additionally, the rental industry has changed significantly since the Colorado Supreme Court issued its ruling in 1996.  Many leases now require residents to obtain renters insurance to insure against damages, and strongly warn residents about the potential for unanticipated events and the significant consequences of not having renters insurance.  In cases not involving landlord negligence and leases requiring mandatory renters insurance, an argument could be made that the liability waiver should be enforced.

Colorado courts have also held that the PLA is a resident’s sole remedy against you when the resident is injured on your property.  This negatively impacts the rental industry in two significant ways.  First, as just discussed, in all likelihood, this means your liability waiver isn’t going to hold up.  Second, the PLA’s applicability potentially increases the type and amount of damages a resident could recover for injuries to person or property.  Your relationship with your resident is based on a lease, which is a contract.  Under Colorado law, generally, a resident can only recover breach of contract damages against you if you breach the lease contract, unless the law imposes an independent duty.  While there are no reported Colorado cases, Colorado courts are very likely to hold that the PLA creates an independent tort duty, separate and apart from the lease contract.  Once a court determines this, an injured resident would be able to recover damages, above and beyond contractual damages.  For example, punitive damages are not recoverable in a breach of contract action; however, they would be recoverable in a PLA action.

Mark Tschetter,  Partner
Tschetter, Hamrick, Sulzer