SAN FRANCISCO—With built-in demand generators and value-added experiences, mixed-use spaces provide a lot of opportunity for hotels. However, they also present liability entanglements hotels need to look out for.
Marty Orlick, partner in the global hospitality group of Jeffer Mangels Butler & Mitchell LLP (JMBM), as well as chair of the firm’s ADA compliance & defense group, noted that one of the most prominent sticky points involved in mixed-use cases involves common areas, particularly as it relates to compliance with the Americans with Disabilities Act (ADA). “That’s one of the issues on mixed-use projects: What are the common areas? Who is responsible for the common areas? Are they being maintained in a compliant fashion?”
Orlick highlighted the importance of these questions with a recent case, Kohler v. Bed Bath & Beyond of Cal. LLC, for which he represented the defendant, a tenant in a multi-tenant shopping center. “The plaintiff filed a lawsuit against Bed Bath & Beyond claiming there were ADA barriers within its property as well as ADA barriers outside the property,” he explained, noting that the allegations inside the store didn’t amount to much and were quickly fixed. The bigger problem, he said, were the outside barriers. “Particularly, there was a parking field right in front of the Bed Bath & Beyond entrance. There were approximately eight or 10 accessible parking spaces. The plaintiff came out and measured the parking spaces and determined that some of the parking spaces had slopes in excess of 2% in any direction and that there was improper signage, so the parking spaces were not compliant.”
The defendant argued that the tenant is only responsible for those areas of a mixed-use project that it leases or controls or operates or owns. “And, in this instance, the landlord had complete control over the common area,” said Orlick. “The lease made it very clear who was responsible for the common area, the condition the common area would be in and who was responsible for compliance with laws in the common area—and that was the landlord.”
The court agreed and dismissed the suit, but the plaintiff filed an appeal. “Two years later, we go before the next judges to consider this issue—the Ninth Circuit Court of Appeals,” said Orlick, noting that the court has a reputation for being pro-plaintiff. “We argued that the law is really clear… The judges in oral argument were unanimous that the plaintiff’s position made no sense.”
Orlick noted that the importance of this case, as it relates to hoteliers, is that hotels that are tenants in mixed-use spaces are less likely to be sued for violations that occur in common areas and that landlords can’t expect to pass liability for ADA violations in common areas on to the tenants. However, this is also dependent upon how hoteliers draft leases and operating agreements. After all, the ADA provides that both the landlord and the tenant of a public accommodation are jointly and severally liable to the disabled plaintiff—but that they can allocate in the lease responsibility for complying with the ADA.
“One thing to realize is that both those who own, lease, lease from or operate a public accommodation are responsible to a plaintiff if there’s a lawsuit, but the ADA specifically recognizes that between the landlord and tenant, for example, you can allocate risk in your lease or operating agreement,” said Orlick. “So you can have risk allocations in your leases, and all good leases do.”
This is especially important when one considers how expensive compliance can be in common areas. “It’s one thing to change out a toilet in a guestroom because it’s too high or too low. It’s easy to make sure you’ve got 36 in. of clear space around a single bed, or your registration counter is at 34 in. here in California, 36 in. elsewhere. That’s relatively inexpensive,” said Orlick. “But if your parking spaces are not compliant, now you’ve got to re-asphalt the parking lot; you may have to build it up and put in a platform so you can get a level 2% in all directions. Or you may have to tear out what otherwise looks to be perfectly fine concrete walkways because they have more than a 2% cross slope or 5% running slope in certain areas.
“That’s expensive stuff and it’s time consuming. If it happens in winter, you can’t touch the outside until spring,” he continued. “These are things that are not as easily controlled, but those are important things in mixed-use projects.”
In addition to being crystal clear in your lease as to who is responsible for what, it’s also important to stick to that. “You need to act the way your contract says. Enforce your contract when you have to perform your obligations—don’t let custom and practice between the landlord and tenant get in the way of what the lease says,” said Orlick. “The lease may say this is all the landlord’s responsibility, but in practice that’s not what happens. The landlord doesn’t take responsibility.
“I get several calls a day with potential defendants, business owners asking me to represent them in litigation. Almost always, the person on the other end will tell me their property is ADA compliant. Why? Because we have a painted space outside for parking, we have a sign on the door, we have grab bars in the bathrooms. That may all be true, but that doesn’t mean anything because most business owners when they get sued are looking for excuses and explanations, not facts,” he continued, noting that the best way to make sure you’re ADA compliant—whether your hotel is in a mixed-use development or not—is to do a pre-acquisition assessment.
“Add it to your due diligence checklist,” said Orlick. “All due diligence checklists start out with a financial analysis, then they do a structural analysis and physical inspections. They’ll check title, for environmental, but none of them for the most part check for ADA compliance.” He pointed to a client who recently retained a consultant through Orlick to do a comprehensive ADA assessment. “They wanted to know what they were buying and any problems they would encounter. They also wanted to know how much was it going to cost to do the work to make it ADA compliant,” he explained, noting that hiring consultants through a lawyer also gives hoteliers more protection. “My client was able to save a tremendous amount of money, way beyond the small fees I charged,” he said, noting that the client was able to use the ADA assessment to help negotiate the price of the hotel. “The client was way ahead because it had the foresight of doing pre-acquisition due diligence.” HB
