California Modifies Commercial Lease Disclosures for Disability Access Laws

Manatt previously published a news alert on July 1, 2013, regarding California's update to Civil Code Section 1938, which required all commercial property leases to disclose whether or not commercial premises have undergone an inspection by a Certified Access Specialist (CASp), and if so, whether the premises have been determined to meet all applicable construction-related accessibility standards under California law.

On September 16, 2016, in an effort to bolster the amount of information provided to prospective tenants of commercial properties concerning the premises' compliance or noncompliance, as the case may be, with such standards, Governor Jerry Brown signed into law Assembly Bill 2093. This bill amends Section 1938 to impose additional disclosure requirements on commercial property owners and lessors. Under the revised statute, a commercial lease entered into on or after January 1, 2017, must now disclose not only whether the premises have undergone a CASp inspection (and the results, if any), but also the following additional obligations:

• Although state law does not require a CASp inspection to be conducted before entering into a commercial lease, if the premises have undergone a CASp inspection and, to the best of the commercial property owner's or lessor's knowledge, there have been no modifications or alterations completed or commenced between the date of the inspection and the date of the lease that have impacted the premises' compliance with construction-related accessibility standards, then the prospective tenant must be provided with a copy of the CASp inspection report before the lease is executed. In addition, if the CASp inspection report concludes that the premises satisfy the applicable accessibility standards, then the owner or lessor must provide copies of (i) any current disability access inspection certificate issued in connection with the CASp inspection and (ii) any other inspection report(s), within seven days of executing the lease.
• If a CASp inspection report is not provided to a prospective tenant at least 48 hours prior to the lease being executed, then the tenant has a right to rescind the lease, based on information contained in any report, for a period of up to 72 hours after the lease is executed.
• The prospective tenant must agree, pursuant to the lease or a separate confidentiality agreement, to keep information contained in any CASp report confidential, except as may be necessary for the tenant or its agents to complete any repairs or correct violations that the tenant agrees to undertake.
• If the premises have not undergone a CASp inspection, or if there have been intervening modifications to the premises since the date of the CASp inspection that have adversely impacted the premises' compliance with accessibility standards, then the lease must contain the following specific disclosure:

  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.

• Any necessary repairs or modifications to bring the premises into compliance with construction-related accessibility standards, which are disclosed by the CASp inspection report, are presumed to be the responsibility of the property owner or lessor unless otherwise agreed to by the parties in the lease.

The intent of the Legislature in enacting the new legislation is to increase the information flow to prospective tenants and to promote an active dialogue on the proactive steps that must be taken to attain compliance with current disability access laws.

To ensure that all commercial leases entered into on or after January 1, 2017, comply with the new law, owners and lessors of commercial properties are advised to take steps now to update their operational procedures so that prospective tenants are timely provided with CASp inspection reports and mitigate the risks of tenants rescinding their respective leases. Lease forms and rental agreements should also be reviewed and revised to ensure they contain the appropriate disclosures and otherwise comply with the new provisions of Section 1938.

For more information or assistance regarding this new disclosure requirement, please contact Michael Polentz, Martin E. Steere and Payvand Abghari.