The Indiana Court of Appeals recently ruled in Hi-Tec Props., LLC v. Murphy that a rental agreement clause, which immunized the landlord from damages caused by mold, was contrary to public policy, inconsistent with common-law principles of tort law, and void altogether. The Court concluded that it is well-settled that a landlord may be held liable for personal injuries caused by hidden or concealed defects known to the landlord but unknown to the tenant and which the landlord fails to disclose.
In Hi-Tec Props., LLC v. Murphy, a college student and her father signed a lease for a below-grade apartment in Plymouth, Indiana. The contested clause of the lease agreement stated in relevant part that “no evidence of mold was observed in the living unit prior to leasing…Lessor shall have no personal liability for personal injury or property damage as a result of any mold, fungus, etc….In any event, Lessee releases and agrees to save harmless, Lessor and their agents for personal injury and suffering, mental anguish, medical expenses, lost wages, etc., to themselves and or family members.” In defending this provision, the landlord argued that the Court has struck down blanket exclusions of liability for all negligence, but not a limited provision of exculpation relating to mold.
In addressing the landlord’s argument and the parties’ free right to bargain, the Court referenced a 2002 unrelated case and emphasized the unequal bargaining power between residential landlords and tenants. The Court noted that exculpatory clauses in residential leases are public matters rather than private terms “primarily because the rental industry provides basic necessity of life, shelter, to thousands of people.” Although the clause was held to be invalid, the Court limited the award of damages to the individuals who actually signed the lease.
Going forward, landlords need to be proactive in ensuring that they remedy known defects, or at the least disclose such defects to the tenant, prior to entering into a lease agreement. Although Hi-Tec Props., LLC v. Murphy dealt exclusively with mold, it is possible the courts will strike down liability waiver provisions for other known defects and hold the landlord responsible for the personal injuries caused by those defects.
About the Author
Shannon S. Frank, a Partner at Kahn, Dees, Donovan & Kahn, LLP (KDDK), in Evansville, Indiana, has nearly 25 years’ experience in the practice of business law, construction law, estate planning and probate administration, health care law, and real estate law. Shannon takes prides in giving exceptional service to her clients, recognizing that relationships with clients play a significant and essential role in providing tailored and comprehensive legal advice.