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