Triple Net Lease Shielded Owner from Liability

Facts: An appliance store leased a building and parking lot “as is” from the owner under a triple net (NNN) lease—that is, a lease in which a commercial tenant is responsible for maintaining the premises and for paying all utilities, taxes, and other charges associated with the property. The owner continued to occupy some of the building’s storage areas. A deliveryman for the tenant fell in a part of the parking lot wholly used and maintained by the tenant. He claimed that he fell because the parking lot hadn’t been maintained and there were defects. He sued the owner, who asserted that the NNN lease insulated it from liability. The employee argued that the owner owed him a duty of care because the premises were not “wholly demised”—that is, rented—to the tenant and the owner still used some areas for itself.

The owner asked a New Jersey court for a judgment in its favor without a trial. The owner contended that because the accident occurred on property occupied by the tenant pursuant to a NNN lease, the tenant—not the owner—was liable. The court ruled in favor of the owner, and the employee appealed.

Decision: The appeals court upheld the decision of the trial court.

Reasoning: On appeal, the court had to determine whether the terms of the triple net lease in this case shielded the owner from liability. An owner is not liable for personal injuries suffered by an employee of a commercial tenant “due to a lack of proper maintenance or repair, when the lease unquestionably places responsibility for maintenance or repair solely upon the tenant,” said the appeals court.

The appeals court pointed out that the employee presented no material facts suggesting that the personnel from the owner were located at the supposedly retained premises, or any other facts suggesting that the owner had an opportunity to discover what the employee described as a latent defect in the parking lot.

The employee also argued that the lease wasn’t triple net. But the appeals court determined that it was. Regarding utilities, taxes, and other expenses associated with the property, the lease stated, “This Lease is absolutely ‘triple net.’” The appeals court rejected the employee’s suggestion that the owner’s use of a small section of the premises, or the owner’s obligation to pay for its own telephone or Internet services for those spaces, somehow changed the triple net lease into something else.

The appeals court reviewed the fact that an owner is not liable for personal injuries suffered by an employee of a commercial tenant “due to a lack of proper maintenance or repair, when the lease unquestionably places responsibility for maintenance or repair solely upon the tenant.” Here, the lease contained no ambiguity that the tenant was responsible for the “costs of upkeep of all existing exterior areas of the Premises, including the repair and/or replacement of the parking areas,” and obligated to “make all necessary or appropriate repairs and alterations to the Premises.” Because the tenant agreed to undertake all maintenance and repair responsibilities associated with the leased premises, the lease agreement absolved the owner of any duty of care towards the employee.

The employee didn’t offer any proof that the owner supervised the tenant’s maintenance of the parking lot, or that its own personnel were routinely involved in such activities. Nor was there evidence that the owner had any reason to believe that the tenant or its maintenance workers would be careless when maintaining the area of the accident.

• Ayala v. West First Roselle, LLC, August 2012