Is Tenant Liable for Its Customers’ Conduct in the Common Areas?

A tenant’s customers and other “invitees” can create nuisances or disruptions that not only disturb other tenants but also harm a shopping center, office building, or other property’s image and reputation. While most leases seek to hold tenants accountable for their invitees, these protections won’t work if they’re poorly drafted. The following scenario illustrates some of the common problems in invitee clauses.

SITUATION

The manager of a shopping center receives multiple complaints about invitees of a plasma center tenant who are still bleeding and leave bloody bandages in the hallways and common areas after donating blood. There are also reported incidents of plasma center invitees loitering, panhandling, engaging in drug activity, sleeping on the curb, disrupting, or harassing other tenants’ invitees and engaging in verbal and physical altercations in the common area.

The plasma center’s lease includes the following clauses:

• Clause 1 gives the landlord exclusive control and management over the common areas;
• Clause 2 bans the tenant from using or permitting “the use of the Leased Premises, in any such manner that will tend to create a nuisance or tend unnecessarily to disturb other tenants or occupants of the Shopping Center, or tend to injure the reputation of the Shopping Center”; and
• Clause 3 bans the tenant from releasing, or permitting the release of, any hazardous, toxic, or harmful substances.

QUESTION

Can the landlord evict the plasma center for the misconduct committed by its invitees in the common areas?

A.            No, because the landlord has exclusive control over the common areas

B.            Yes, because the tenant violated Clause 2 in permitting its invitees to create a nuisance

C.            Yes, because the tenant violated Clause 3 in permitting its invitees to release toxic substances

D.            No, because tenants can’t be legally responsible for their invitees  

ANSWER

A. The landlord can’t evict because it has exclusive control over the common areas where the invitee misconduct occurred.

EXPLANATION

It’s not enough for tenants to behave themselves; you also need to ensure that their employees and invitees refrain from illegal, nuisance, or other disruptive activities while they’re on your property. This is especially important when dealing with retail and restaurant tenants. This scenario, which is based on an actual Missouri case, highlights common loopholes in lease clauses that purport to hold tenants responsible for their invitees [Casselsco, Inc. v. Alvi, 2022 Mo. App. LEXIS 184, 2022 WL 1010069].

The first loophole involves location. The tenant’s duty under Clause 2 was not to permit its invitees to create a nuisance, disturb other tenants, or harm the shopping center’s reputation while in the “Leased Premises.” Although the plasma center's invitees certainly crossed the line, they did it in the common areas where the landlord retained exclusive control. So, A is the right answer.

WHY WRONG ANSWERS ARE WRONG

B is wrong for two reasons. We’ve already discussed the first reason, namely, the fact that the invitees’ misconduct occurred in the common areas controlled by the landlord rather than the leased premises controlled by the tenant. The second reason illustrates another flaw in the Clause 2 language: reliance on the word “permit,” as in “permitting the use of the” space so as to create a nuisance, etc.

Since the lease didn’t define “permit,” the Alvi court interpreted its “plain, ordinary and usual meaning” as giving permission, authorizing, allowing by silent consent, or not prohibiting. The commonality of these nuances is the implication that the person permitting has a degree of control over the person being permitted. But the plasma center in this case had no such control over its invitees, the court reasoned. Once they gave their donation and left the premises, they were beyond the center’s control. To have expected the plasma center to follow after and somehow stop them from removing and discarding their bloody bandages would have been unrealistic, according to the court.   

C is wrong for the same reasons that B is wrong. In other words, it’s not what the invitees did but where they did it—that is, in the common areas under the landlord’s exclusive control—that determined responsibility for leaving toxic substances, as well as the fact that the tenant couldn’t be considered as having “permitted” the conduct.  

D is wrong because tenants certainly can be held responsible for their invitees’ behavior, provided that the lease spells this out in a clear and reasonable way. Thus, the tenant was liable for how invitees behaved while they were inside the plasma center. But because of how the lease was drafted, that responsibility didn’t extend to the common areas.

3 Things Landlords Can Do to Protect Themselves

The takeaway from the Alvi case is that a standard clause requiring tenants not “to permit” misbehavior of their invitees in common areas doesn’t establish accountability if those areas are under your sole and exclusive control. The principle of with-control-comes-liability applies equally to third-party lawsuits. Thus, if a tenant’s invitee causes injury to another customer in the common area, you and not the tenant will be the primary target for liability. While sharing control of the common areas with tenants can minimize these liability risks, it may also create much worse problems for landlords. Besides, there are ways to hold tenants accountable for how their invitees behave in common areas without ceding exclusive control in them.

1. Make tenants notify invitees of shopping center rules. The first thing you can and should do is establish clear rules for behavior in the common areas and require tenants to communicate those rules to their invitees. For example, the landlord in Alvi could have required the plasma center to conspicuously post notices requiring all donors to cover their bleeding wounds, refrain from removing and discarding bandages, and follow other rules of hygiene at all times when leaving the shopping center.

2. Require tenant to hire security guards. Another strategy is to reserve the right to require a tenant, at its sole expense, to hire one or more security guards, install cameras, or implement other security measures to control its invitees.

3. Beef up the nuisance clause. In addition to the above, landlords can draft clearer and stronger nuisance clauses that apply not simply to the leased premises but all parts of the property.

Model Language

Tenant shall conduct its business and use reasonable efforts to control its agents, employees, invitees, contractors, and visitors in the Leased Premises and Common Areas in such a manner as not to create any nuisance, or unreasonably interfere with, or unreasonably annoy or disturb, any other tenant or Landlord in its operation of the Property.