Asbestos removal: by landlord or tenant.

Asbestos removal: By landlord or tenant

Rapid-American Corp. vs. 888 Seventh Avenue Associates Limited Partnership (New York Law Journal June 27, 1991, pg. 23 col. 2) asks a $3 million question -- is the tenant or is the landlord responsible for removing asbestos when a tenant alters its space for subletting purposes.

Rapid-American is a tenant at 888 Seventh Avenue and occupies 19 floors in the building. Its lease with the landlord expires in 2005 and provides for the right to sublet the premises subject to the consent of the landlord which cannot be unreasonably withheld. In fact, since 1970 the tenant has regularly sublet substantial portions of the leased premises. Approximately 87 percent of the space is leased to various subtenants. Further, Rapid-American had often renovated the space to meet the needs of its subtenants.

In 1985, New York City enacted local law 76 which requires that the presence and condition of asbestos be ascertained before any building alteration is performed; that asbestos be removed or encapsulated if the renovation work will cause the asbestos to become airborne; and that all asbestos abatement activities be conducted in accordance with approved safety procedures. The law does not require removal of asbestos that will not be disturbed by the alteration work.

After the law was enacted, Rapid-American retained a testing laboratory to conduct an asbestos survey of the leased premises which revealed that there was substantial asbestos containing material within the leased premises and that the material should be removed as renovation work occurs. Rapid-American decided to remove asbestos containing material during the course of renovations and advised the landlord that the removal was the landlord's responsibility under the lease and requested that the landlord assumed the expense. The landlord denied the request stating that the lease required the tenant to perform all renovations in accordance with applicable laws at its sole expense.

Rapid-American undertook the asbestos removal work anyway and expended thus far nearly $3 million on the project. The tenant sought reimbursement and when the landlord refused to reimburse the tenant, the tenant commenced an action seeking a declaratory judgment that the landlord is responsible for removing asbestos containing material from the leased premises, and the tenant be reimbursed for the expenses which it had incurred in the asbestos removal program.

It was Rapid-American's contention that the landlord is responsible for the removal of asbestos because the dangerous condition was created by its predecessor who built the building in the first place. The landlord is required both by the new statute as well as by the provisions of the lease to maintain the building in a good and safe condition.

The landlord claimed that the asbestos removal work is required only because of the renovations which the tenant performs for its subtenants. Since the lease requires that Rapid-American be responsible for all costs associated with the renovations, and must insure that all work be done in compliance with the law, it is the tenant who must bear the expense of asbestos removal. Further, the lease itself provides that the tenant must comply with all laws which impose any obligations arising from the tenant's use of the leased premises.

The court ruled that generally, the owner of a building is obligated to comply with all laws affecting the property. Also, the New York Administrative Code requires the landlord to be responsible at all times for the safe maintenance of the building and its facilities. The question presented by this case is whether the terms of the lease itself shift the responsibility from the landlord to the tenant with respect to asbestos removal.

While the lease requires the tenant at its expense to comply with any law imposing a duty which arises from the tenant's use of the leased premises, and also requires that the tenant must bear all the expenses and comply with all laws in connection with those renovations, the lease also requires that the landlord comply with all laws affecting the building.

The court ruled that the asbestos hazard was an inherent characteristic of the material employed in the original construction of the building. The lease provides that the tenant is not responsible for any repair or structural or other substantial change in the lease premises unless such change is required by the tenant's use of the premises. Consequently, the critical issue in this case is whether the asbestos removal is required by Rapid-American's use of the premises.

The landlord claims that the tenant uses the property for the business of subletting which entails renovation work and that since the asbestos hazard is generated by Rapid-American's renovation work, the asbestos removal should be Rapid-American's responsibility.

The court ruled, however, that since the leased premises are being used to sublet office space, which was the very use contemplated by the lease, Rapid-American is not occupying or using the property in any special way. Since the inception of the lease, the tenant has sublet and renovated the space. The tenant has not changed its use of the premises. Thus, the duty to remove the asbestos hazard is imposed by a change in the law and not because of any particular use of the property. The original asbestos hazard was created by the owner of the property and not by the tenant's use of it.

Clearly, the removal of asbestos is an extraordinary work not specifically contemplated by the parties when they entered into the lease. However, since the removal requirement does not arise out of the tenant's use of the premises, there is no provision in the lease which shifts the responsibility to the tenant for the removal expenses. The landlord under both the law and the lease is required to keep the building in good, safe condition and in compliance with all laws.