ADA Compliance in Real Estate

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Regardless of the industry, most business owners are familiar with Title I of the Americans with Disabilities Act (“ADA”) prohibiting disability discrimination in the employment context and enforced by the Equal Employment Opportunity Commission (“EEOC”).  Title I is only one of five distinct sections of the ADA, and other sections, namely Title III, impose additional requirements unique to the real estate industry.  Title III prohibits disability discrimination in publicly-accessible programs and buildings and is enforced by the Department of Justice (“DOJ”).  As Title III mandates, commercial facilities and places of public accommodation must provide equal access for individuals with disabilities.  This creates a duty on commercial real estate owners, builders, developers, and tenants to make reasonable modifications to policies or programs that limit the access of disabled individuals and to ensure newly constructed facilities comply with ADA design standards.  Thus, the ADA’s impact on the real estate industry exceeds compliance in the employment context and extends to the operation and construction of buildings open to the public.  

Facilities Covered by Title III

With few exceptions, Title III applies to almost all commercial facilities and publicly-accessible buildings.  The Act defines a place of public accommodation as a facility whose operations affect commerce and which falls within one of the following general categories: (1) hotels and other places of lodging; (2) restaurants, bars, and other food/drink establishments; (3) movie theaters, concert halls, and other entertainment venues; (4) convention centers, auditoriums, and other places of public gathering; (5) grocery stores, shopping centers, and other sales or rental establishments; (6) banks, salons, medical and law offices, gas stations, and other service establishments; (7) public transportation stations; (8) libraries, museums, and places of public display; (9) amusement parks, zoos, and places of recreation; (10) schools and places of education; (11) homeless shelters, food banks, or other social service centers; and (12) gyms, health spas, and similar places of exercise.

Title III Requirements

Title III prohibits any person who owns, leases, or operates a place of public accommodation from discriminating against disabled individuals by denying them “the full and equal enjoyment of goods, services, facilities, privileges, advantages, or accommodations.”  42 U.S.C.A § 12182 (a). The scope of this obligation includes a duty to make reasonable modifications in policies or programs offered to the public and to remove architectural and other barriers from buildings.  As provided in the next code section, prohibited discrimination also includes the failure to design and construct facilities that are “readily accessible to and usable by individuals with disabilities.”  42 U.S.C.A. § 12183 (a)(1). 

1. Reasonable Modifications to Policies or Programs

Making reasonable modifications to policies or programs is required unless a modification would be an undue burden or would fundamentally alter the nature of the goods or services provided.  42 U.S.C.A § 12182 (a)(ii).  For example, reasonable modifications could include a hotel modifying its “no pets” policy by permitting service animals.  Demonstrating undue burden under Title III is similar to demonstrating undue hardship in the Title I context where an employee requests a job-related accommodation.  Like undue hardship, the Title III undue burden analysis is fact specific and considers factors, including, the nature and cost of the modification; the business’s size and overall financial resources; and any impact the modification would have on legitimate business interests, such as safety or avoiding significant disruptions to operations.  

2. Removing Barriers from Existing Structures

Title III also requires removing architectural and other barriers in existing structures to ensure equal access.  The applicable regulations list dozens of examples of how barriers may be removed, including by installing ramps, widening doors, repositioning shelves, etc.  The duty to remove barriers applies only if doing so is "readily achievable."  42 U.S.C.A § 12182 (b)(2).  Readily achievable means “easily accomplishable and able to be carried out without much difficulty or expense.”  42 U.S.C.A § 12181 (9).  The factors considered in determining whether removing a barrier is readily achievable are similar to those in the undue burden analysis, but as the above definition suggests, the readily achievable standard is lower and an easier standard for business owners.  However, even if removing a barrier is not readily achievable, the owner or operator of the facility is not completely relieved of its duties and still must provide an equally effective alternative.  For example, if redesigning a gas pump to make it easier for a handicapped individual to access is not readily achievable, the gas station must offer an effective alternative, which could include providing an attendant at no charge to pump gas for individuals with disabilities.

3. Accessible Design Standards for New Construction and Alterations

Last, all newly constructed places of public accommodation and commercial facilities (defined as privately owned nonresidential facilities, such as factories, warehouses, or office buildings) must comply with the ADA’s accessible design standards.  Title III considers new construction to be any facility that was first occupied after January 26, 1993.  The rules for the construction of new facilities are much stricter than those that apply to the removal of barriers in existing structures, i.e., only if readily achievable.  

All new construction, including any alterations, must comply with the architectural standards for accessibility known as the Americans with Disabilities Act Accessibility Guidelines (“ADAAG”).  The ADAAG were published as an appendix to the federal ADA regulations and were last amended in 2010.  28 CFR Part 36, Appendix A.  Full compliance with the 2010 Standards is required unless the entity can establish that it is structurally impracticable to meet the requirements, which is defined as “those rare circumstances when the unique characteristics of terrain prevent the incorporation of accessibility features.”  28 C.F.R. § 36.401 (c)(1).  The ADAAG include both general design and specific facility requirements, such as having one or more accessible bathroom stalls, an adequate number of accessible handicap parking spaces (including with aisle or van access), and service counter and bathroom sink height requirements.

Managing Compliance Costs and Risk

Civil penalties for violating Title III include up to $75,000 for the first violation and $150,000 for subsequent violations.  Since Title III’s requirements apply to pretty much any party with an interest in real estate, owners, landlords, management companies, tenants, architects, contractors, and other entities that own, use, lease, manage, design, or construct facilities face potential liability.  Additionally, Title III provides for joint and several liability when a property is not compliant.  As such, the parties listed above not only have the potential to be liable themselves but also to pass liability on to parties with whom they contract.  While from a DOJ enforcement perspective, both an owner and a tenant of a property (and possibly others) can be liable for Title III violations, as illustrated by the examples below, shifting the risk of liability can be accomplished contractually through indemnity clauses and other requirements.

Leases

Assume Company L leases shopping center space to Boutique T, but the space does not comply with the service counter height requirement or have enough accessible fitting rooms.  Under Title III, both Company L and Boutique T are responsible for removing the barriers.  While the DOJ can look to one or both parties to require compliance, as a matter of contract, either party can shift the financial responsibility for remedying violations to the other party.  For example, as a condition of the lease, Company L could require Boutique T to indemnify it against all losses caused by Boutique T’s failure to provide an ADA-compliant space or vice versa. 

Construction Contracts

Similarly, when contracting for construction or alteration of a building, the contracting party may require language obligating the architect, designer, engineer, or builder to verify its compliance with the ADA.  This could include requiring the builder to provide a certification of compliance backed by an indemnity provision that covers the cost of any remediation measures, attorney’s fees, and other defense costs if a violation is discovered.  The indemnity language should be limited to claims arising from the failure to comply with ADA design standards.  Otherwise, it is unlikely to be accepted by most design professionals or be insurable under errors and omissions policies.

Private Actions and “Drive-By” Claims

In addition to potential penalties assessed by the DOJ, Title III provides that individuals may bring a private cause of action.  Recovery is limited to injunctive relief and reasonable attorney’s fees and expenses, and no other monetary damages are recoverable under federal law.  Note, however, some states have passed statutes supplementing Title III by providing for additional remedies to a prevailing plaintiff, including statutory, compensatory, and/or punitive damages. 

Standing to assert a private cause of action under Title III is a low threshold that can be met even if the plaintiff has not actually been denied access or, in some cases, even visited the business.  Instead, standing is established merely by showing the plaintiff’s awareness of a violation that reasonably would deter the plaintiff from visiting the establishment.  The low threshold for standing, coupled with the availability of attorney’s fees if the plaintiff proves even a technical or minor violation, has incentivized thousands of “drive-by” ADA claims asserted against restaurants, grocery stores, apartment complexes, and countless other businesses. 

In the typical drive-by scenario, a plaintiff alleges minor violations that have not actually harmed the plaintiff and usually can be remedied relatively inexpensively, e.g., improper signage designating accessible seating or parking spaces.  The business owner or operator usually receives a demand letter from a law firm representing the plaintiff that outlines the violations and demands monetary payment for alleged fees and expenses, either with or without remedying the violations, to avoid a lawsuit.  Oftentimes, the plaintiff’s attorney’s fees and expenses, which can include expert fees, quickly eclipse the cost of remediation.

Strategies for Managing Drive-By Title III Claims

Barring exceptions in states that have passed laws permitting the recovery of individual monetary damages, the recovery of attorney’s fees generally is what drives private Title III claims.  Thus, where a business is the target of alleged Title III violations, stopping the accrual of plaintiff’s attorney’s fees is a paramount objective and can be accomplished by various strategies. 

Early Settlement

When a business receives a Title III demand letter as in the scenario described above, as unappealing as it may sound, negotiating an early settlement sometimes may be the best option.  That does not mean a business should agree to pay the plaintiff’s initial demand without determining the merit of the alleged violations.  The first step is to engage an ADA compliance expert to perform an inspection of the building, verify whether prohibited barriers exist, and if so, the feasibility of remedying any violations.  Provided a violation is confirmed and remediation is feasible, completing remediation and negotiating a reasonable fee payment stops plaintiff’s attorney’s fees from continuing to accrue and allows the business to avoid defense costs and other burdens of litigation. 

Mootness

Sometimes despite the business’s remediation efforts, negotiating a reasonable pre-litigation settlement fails or is otherwise unworkable.  If litigation is filed, provided the barrier has been removed and is not reasonably likely to reoccur, the defendant can raise the defense of mootness.  Once a defendant has permanently remedied the violations identified in the complaint, there is nothing for the federal court to enjoin, and the lawsuit must be dismissed.  Since the plaintiff is not the “prevailing party” if the case is dismissed as moot, no attorney’s fees will be owed.   As a word of caution, mootness deprives the federal court of subject matter jurisdiction, so raising mootness in jurisdictions with state laws providing for additional remedies would not be effective.  In those states, raising mootness likely would only deprive the federal court of subject matter jurisdiction while permitting the plaintiff to bring a claim in state court for compensatory or other statutory damages.

Stay of Proceedings

Another option is to file a motion to stay the case pending remediation.  A motion to stay may prove cost effective for the defendant, particularly if completing remediation will be time consuming.  Obtaining a stay essentially limits the defendant’s liability for attorney’s fees and court costs while providing an opportunity to remedy the alleged violations that once completed, render the plaintiff’s claims moot.   Most federal courts are familiar with Title III and the concerns and potential for abuse in drive-by litigation.  Unlike other litigation, motions to stay Title III proceedings are routinely filed, not disfavored by the courts, and generally are granted if an effective plan for remediation is underway. 

Takeaway

The ADA creates unique requirements and considerations for the real estate industry.  Whether navigating an employee’s request for reasonable accommodation, entering into a lease, contracting for the construction of new development, or responding to a Title III demand letter or lawsuit, consulting a qualified employment and/or real estate attorney can assist businesses with mitigating and shifting the risk of liability under the ADA.