July 24, 2015

Recent Developments in Retrofit Liability of Publicly Accessible Properties

If you own or invest in an older, publicly accessible property that does not comply with new regulations, you may be at risk of substantial liability. Retrofitting older properties to comply with new legal requirements and standards can be expensive — and courts have been ruling unfavorably for investors and developers of non-compliant facilities under the Americans with Disabilities Act of 1990 (ADA) and the Fair Housing Act of 1968 (FHA). Owners and investors need to prepare and protect themselves.

Who Pays for Retrofitting?

Recent cases barred retrofit liability claims against architects and engineers charged with the original building design. In separate cases in Nevada and in federal appellate court in Virginia, courts dismissed claims by owners/developers of a “public accommodation” seeking reimbursement and indemnification from design professionals for the costs to retrofit their properties for ADA compliance. The courts held that permitting prosecution of these claims undercut the fundamental objective of these laws — because permitting an owner to “completely insulate itself” from liability for violations by contract, or through common law principles, would likely reduce the incentive to comply and to ensure compliance. Federal district courts in Maryland, Mississippi and Tennessee have also dismissed similar owner/developer claims against design professionals in cases such as United States v. The Bryan Co., 2012, and Equal Rights Ctr. V. Archstone Smith Trust, 2009. In these cases, owners and investors are left to pay for bringing properties into compliance.

How Can Owners and Developers Protect Themselves?

Real estate owners/developers need to carefully structure and word their contracts with design professionals to allocate responsibility for compliance with the ADA and FHA. When investing in, developing and operating commercial real estate assets, especially “public accommodations” under the ADA and FHA, carefully consider real estate, land use, regulatory, environmental, construction, finance, leasing and zoning issues.

Owners should stay actively engaged in the design and construction phases — don’t delegate this responsibility and rely solely on the design professionals and contractors. An “ounce” of prevention, or at least consideration of pertinent legal issues, on the front end of a project can save a much more expensive “pound” of cure after a problem arises.

Faegre Baker Daniels’ construction and real estate lawyers have experience advising on legal issues that may arise during design and construction and how to manage liability.

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