As discussed in a recent blog post, two months ago, a New Jersey Appellate Division panel announced that commercial tenants were not liable for a dangerous condition outside of their leasehold. Now, in a surprising ruling, a separate Appellate Division panel has reached the opposite conclusion. While it is likely that the Supreme Court of New Jersey will be asked to resolve the divergent rulings, in the meantime, commercial tenants should be aware of their shifting duties to guests and customers.

In November 2012, the Appellate Division addressed an appeal from the Trial Court’s grant of summary judgment to a commercial tenant in a slip-and-fall case, where the injury occurred in the parking lot of a strip mall. In Kandrac v. Marazzo’s Market at Robbinsville the plaintiff filed suit against the owner/landlord of a strip mall as well as a commercial tenant in the strip mall (the grocery store at which she had been shopping) prior to her injury in the parking lot. The plaintiff alleged that both the owner of the strip mall and the commercial tenant were negligent in their maintenance of the parking lot. The Trial Court granted summary judgment in favor of the commercial tenant and the Appellate Division affirmed, concluding that the grocery store “owed no duty of care to its invitee for an injury that occurred in the common area of the shopping center.”

In Kandrac, the Appellate Division relied in large part on the lease agreement between the grocery store and the property owner, which clearly stated that the tenant was not responsible for the maintenance of “common areas,” including sidewalks and parking areas. The Appellate Division acknowledged that while the covenant in the lease pertaining to the landlord’s obligation to maintain common areas in good operating condition did not relieve the tenant of all duties to its customers regarding ingress and egress, the assignment of responsibility in the lease impacted the tenant’s ability to address conditions in the parking lot. The Court concluded that the lease “squarely assign[ed]” the duty of maintenance to the landlord, and thus an innocent victim had adequate recourse against the landlord.

More recently, in January 2013, a separate Appellate Division panel reviewed an appeal from a jury award of $525,000 for a slip-and-fall where the plaintiff’s injury occurred on an exterior area around the perimeter of the commercial tenant’s unit, which the developer—not the tenant—was contractually obligated to maintain. Notwithstanding the ruling in Kandrac, in Nielsen v. Wal-Mart Store #2171 the Appellate Division held that “[s]imply because Walmart owns only the building from which it conducts its business and not the abutting perimeter or other common elements should not alone determine the duty it owes to its invitees.”

Importantly, the Nielsen court found that the fact that the developer, rather than Walmart, was contractually bound to keep the common areas in good repair carried “little weight” at all. The Nielsen court went so far as to criticize the Kandrac holding as “unduly dependent upon the assignment of responsibility for a common area defined by the defendant’s lease.” Rather than focus on the respective duties between the two commercial parties, the Nielsen court determined that the imposition of liability on a commercial tenant in such circumstances “advances important policy interests by fostering the land occupier’s constant vigilance.” The Nielsen court further opined that the commercial tenant could seek indemnification from the landlord. Thus, the imposition of a duty on the part of the tenant to maintain surrounding areas did not “unduly interfere” with the contractual relationship between the landlord and tenant.

With divergent Appellate Division decisions just two months apart, the New Jersey Supreme Court may ultimately be called upon to further clarify under what circumstances a commercial tenant has a duty to monitor the condition of common areas independent of the responsibilities contracted for in the lease agreement. In the meantime, however, commercial tenants in New Jersey should be aware that a dangerous condition in a common area could expose the tenant to liability. While a well-drafted lease provision addressing the attendant responsibilities of each party may afford some protection, the current state of the law in New Jersey remains in flux as to the extent of common law duties that may properly be imposed.

Kevin W. Weber, an associate in the Gibbons Business & Commercial Litigation Department, co-authored this post.