Real Estate: New Amendment to California Law Affects Commercial Real Property Leases

January 13, 2017

California Governor Jerry Brown recently signed Assembly Bill No. 2093 amending Civil Code Section 1938, the law requiring commercial landlords to inform their tenants whether the leased premises have been inspected by a Certified Access Specialist (a "CASp"). A CASp is a person who has been certified by the State of California as having sufficient knowledge to review and/or inspect design requirements and standards relating to building access for persons with disabilities. A list of qualified CASps is currently located on the website for the California Department of General Services at DGS.CA.GOV . The new amendment to Section 1938 of the California Civil Code ("Amendment") affects all commercial property leases executed on or after January 1, 2017.

Effect of Amendment. Consistent with the terms of the law prior to the Amendment, owners are still required to state on every commercial property lease whether the premises have been inspected by a CASp.

If the premises have been inspected by a CASp, the following provisions of the Amendment apply:

Copy of Report. If, to the best of the owner's knowledge, there have been no accessibility-related modifications completed or commenced between the date of the inspection and the date of the lease, then the owner is required to provide to the prospective tenant a copy of any report prepared by the CASp prior to execution of the lease. The tenant must agree to keep the information in the report confidential, except as necessary for the tenant to complete any repairs of violations of construction-related accessibility standards that the tenant agrees to make. If the premises have been issued an inspection report by a CASp indicating that the premises meet all applicable construction-related accessibility standards, the owner must provide a copy of the current disability access inspection certificate and any inspection report to the tenant within seven days after the date of lease execution (if not already provided to the tenant).

Responsibility for Repairs. The owner is presumed to be responsible for making any repairs necessary to correct violations of construction-related accessibility standards that are noted in a CASp report. However, the owner and tenant may provide in the lease that the repairs are the tenant's responsibility.

Tenant's Right to Rescind the Lease. The prospective tenant has the right to review any CASp report prior to execution of the lease. If the report is not provided to the prospective tenant at least 48 hours prior to execution of the lease, the tenant has the right to rescind the lease (based upon the information contained in the report) for a period of 72 hours after execution of the lease.

If the premises have not been inspected by a CASp, the Amendment requires the lease to include the following language:

"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."

What it means for you:
To prevent a tenant from exercising its statutory right to rescind the lease, commercial property owners should provide copies of any reports prepared by a CASp to prospective tenants at least 48 hours prior to execution of the lease, and should add a provision to the lease confirming that such reports have been provided to the tenant.

If the premises have not been inspected by a CASp, the commercial property lease must incorporate the statutory disclosure noted above. The parties should consider adding a provision to the lease specifying in advance which party will bear the costs of obtaining a CASp inspection and making any necessary repairs, should either party elect to hire a CASp after lease execution.

The Amendment does not clearly state whether it applies to commercial property lease amendments executed on or after January 1, 2017, or if it only applies to new commercial property leases executed after that date. Given the ambiguity, we believe it is prudent to include the necessary disclosures in lease amendments as well as new leases.

Finally, we note that owners and tenants of commercial real property are not required to hire a CASp to inspect the leased premises. An election not to hire a CASp is inadmissible to prove a lack of intent to comply with California law. (Cal. Civ. Code §55.53(f)). If an accessibility-related lawsuit is filed in a California state court against an owner or tenant, certain protections may be available to the defendant if a property has been inspected and certified by a CASp (e.g., the right to a temporary stay of litigation, an early evaluation conference and a potential reduction in statutory damages), provided that the defendant corrects any noted access-related violations within certain timeframes. (Cal. Civ. Code §§55.54, 55.56(g)).
 

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