A recent Colorado Supreme Court case left a surprised tenant "holding the bag" for its landlord's liability - and put landlords and tenants on notice regarding the importance of understanding their respective lease obligations and negotiating lease provisions that appropriately reflect each party's intentions and enforcement rights.

On March 21, 2011, the Colorado Supreme Court imposed liability on a flower shop tenant, under the tenant's shopping center lease, in a case where a customer was injured in the shopping center parking lot that was not properly maintained by the landlord. Constable v. Northglenn, LLC, 248 P.3d 714 (Colo. 2011). The case arose at a Northglenn shopping center where a woman slipped on ice in the shopping center's parking lot. Though the woman was present at the shopping center in order to visit the flower shop, she was injured in the parking lot that provided parking for the entire shopping center, not just the flower shop.

It is quite common, under leases, for a landlord to impose an indemnification obligation on a tenant, even for the landlord's own negligence. It is quite common, under leases, for a landlord to impose an indemnification obligation on a tenant, even for the landlord's own negligence. This was the case with the five-year lease between the shopping center owner and the flower shop. The tenant, however, argued that the indemnification provision violated public policy because it purported to relieve the landlord of non-delegable duties under the Colorado Premises Liability Act, and that the landlord had exclusive control over the parking lot. Unfortunately for the tenant, the Colorado Supreme Court disagreed.

While the lease contained provisions requiring the landlord to keep the parking areas and driveways in reasonably good order, condition and repair, those very same lease provisions stated that if the landlord failed to do so, the flower shop tenant had the right to cause the maintenance to be performed itself, and to deduct the expenses of that maintenance from the rent. While this was theoretically the right of the tenant under the lease, it is easy to imagine that the tenant might not have been focused on policing and maintaining the parking lot, even if it had a right to do so.

The decision not only highlights the importance of understanding one's duties and obligations under a lease agreement, but also implicitly recognizes the distinction between simple negligence (for which the flower shop tenant was obligated to indemnify) and gross negligence (for which the landlord was not entitled to be indemnified).

In light of this recent decision, we recommend that landlords and tenants carefully review their leases to avoid these types of surprises.