California Amends Its Legislation Requiring That Landlords Disclose to Potential Tenants the Status of Americans with Disabilities Act Compliance. Failure to Disclose Has Adverse Consequences to the Landlord.

By Patric J. Kelly, Esq.
Adleson, Hess & Kelly, a Professional Corporation
December 2016

Introduction and Summary

This article deals with new requirements enacted by the California State Legislature.  The "urgent" statute was signed by Governor Brown (September 16, 2016) and took effect immediately.  The new law amends prior law in the area.  The subject is commercial landlord disclosure requirements to tenants regarding the landlord's compliance with obligations under the Americans with Disabilities Act and other disability protection statutes.  The disclosure must take place before the lease becomes effective.  Failure to comply allows the tenant to rescind the lease.

The Legislation and its Impact

California previously enacted legislation in 2013 requiring commercial landlords to make certain disclosures to potential tenants in any lease for the property. One of the purposes of the legislation was to reduce the uncertainty involved in who was responsible for ADA requirement upgrades should they be required during the term of the lease, or before the lease becomes effective, and to make it clear exactly what requirements the building did or did not meet.  The legislation did this two ways:  it enacted a program for certification by any person who meets certain specified criteria to become a Certified Access Specialist (CASp).  It also required a commercial property owner or lessor to state on every lease form or rental agreement executed on or after July 1, 2013, whether the property has been determined by a CASp to meet all applicable construction-related accessibility standards.

This legislation has been updated.  One of the purposes of the new legislation was to inhibit the flood of predatory lawsuits where "drive-by" handicapped people become plaintiffs in a suit, many times just to collect the attorney's fees provided by the law.  The plaintiff receives a nominal sum.  The attorney receives thousands and thousands of dollars.  There are thousands of these lawsuits that have been filed across the state.  Many suits are filed by the very same plaintiff. 

The new legislation designates very specific language and disclosure requirements.  Now, any lease form or rental agreement executed after January 1, 2017, would require the landlord/owner to disclose whether the premises have been inspected by a CASp specialist.  If inspected, the landlord must provide the lessee or tenant with a current disability access inspection certificate and inspection report or a copy of a CASp inspection report if the premises have been issued an inspection report indicating that they meet applicable standards.

If a CASp inspection has been made and the premises have not been altered, the landlord is to provide a copy of the report to the tenant at least 48 hours prior to execution of the lease.  The report is to remain confidential except as necessary to make repairs and corrections.

A presumption is established in the legislation that the landlord must make any corrections recommended in any CASp report unless otherwise agreed by the parties to the lease.  This is why it is extremely important to consider these issues ahead of time.  Lease negotiations should include discussions of the ADA problems, if any, and who is going to pay for them or the consequences of failure to have them.

Any existing CASp report must be given to the prospective tenant.  If it is not, then the tenant can rescind the lease, based upon information in the report, for 72 hours after execution of the lease.  Obviously, a receipt should be obtained when the CASp report is delivered to the potential tenant.  If there is a letter of intent regarding the lease, then the receipt should be in the LOI.

If the property has not had a CASp inspection or has not been issued a disability access inspection certificate, then the lease form must include the following statement:

"A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises."
 
The legislature decided to make this an urgency statute to go into effect immediately.  Here is the Legislature's rationale:

"This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:  In order to increase compliance with accessibility standards for the benefit of the public, especially disabled consumers who may experience unjust discomfort, difficulty, or embarrassment when public places or businesses are not compliant with accessibility standards required by law and to improve the ability of businesses to correct accessibility violations, provide clarity to property owners and tenants regarding responsibility for correcting accessibility violations and increase awareness of state programs to inspect properties for accessibility violations, it is necessary that this act go into effect immediately."

Obviously, the Legislature has concerns that the laws protecting the disabled are not being followed and that other problems exist in enforcing the parties' rights. 

What to do?

  1. Review your lease formation process.  AUDIT all proposed leases to assure compliance with this statute and that any reports have been timely delivered to the proposed tenants.  Put this on your checklist.  Obtain receipts.  Decide whether to have your commercial buildings inspected if not already done.   Determine whether the property has been CASp inspected and certified.  If so, make certain to disclose the reports prior to the lease becoming effective.  If you have leases that are going into effect, review the lease forms to make sure the required language is included.
  2. If not inspected, make sure the statutorily required language above has been included.
  3. Determine with your tenants who is going to be responsible for paying for ADA or other disability statute required upgrades or corrections, and paying for the consequences of not complying.  These can be very expensive!

Conclusion

Protection of the disabled has become a major issue in recent years.  Property owners must be aware of their obligations to the disabled, who is going to be responsible to make the building compliant, and who is going to pay for them and for damages for failure to comply.  Failure to properly disclose reports may allow your tenants to rescind the lease.  Failure to have a compliant building may expose the owner to significant costs, attorney's fees and damages.  Pay close attention to these obligations.