NJ Court Upholds Rule Shielding Bank Owned Property from Sidewalk Liability

By April 14, 2020Injury Law

Recently in Markou v. Caliber Home Loans, Inc., a New Jersey appellate court upheld the rule that a “mortgagee in possession” of a vacant property is not liable for sidewalk accidents because a vacant property does not qualify as a commercial property. In the Markou case, a pedestrian slipped and fell on snow-covered ice while walking his dog in front of a vacant single-family home.  The owner, Caliber Home Loans, was a mortgagee in possession, i.e. it was deeded the property by way of sheriff’s sale.  Upon taking ownership of the property Caliber hired a real-estate broker, which listed the property for sale, and a property management company, which performed basic property preservation services.

In upholding the dismissal of Markou’s case, the key determination was the appeals court’s agreement the vacant property was “residential.” New Jersey only requires “commercial” property owners to maintain their sidewalks in a reasonably good condition, and this includes the duty to remove snow and ice. This duty, however, does not extend to residential property owners. In other words, before even asking whether a property owner has a duty to maintain the sidewalk, one must ask whether the property in question is commercial or residential.  

The court rejected Markou’s argument that the Caliber’s status as a mortgagee in possession automatically changes the status of the property to commercial. Instead, the court looked at the policy behind imposing the liability on commercial owners and found that the capacity to generate income and spread the risk of loss to third parties are the main differences between the commercial and residential liability.

The court found that Caliber’s property was vacant and did not generate any income. Caliber did not conduct any daily business activities and did not benefit from the sidewalk abutting the property. Furthermore, the mere access to the property for selling purposes did not change the property’s status to commercial property because a residential owner who offers the property for sale enjoys the same access. Looking at previous decisions, the court noted that even when vacant properties are zoned as commercial, liability still does not attach because a vacant property has no means of generating income to purchase liability insurance or spread the risk of loss to other parties.

Ultimately this decision also shows the court’s practical understanding that an underperforming property should not be further burdened with the threat of a personal injury lawsuit.

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