November 23, 2010

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Question:

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Hi Ken

    If we sell a system to an apartment owner that has two units, hers and a tenant, and the owner signs the contract, what happens if there is a loss in the tenants unit.  It would seem that we have no limitation of liability to that tenant. Can the tenant bring a valid suit in the event of a loss?   Also contracts contain language states that we have no liability for others in that property.   My guess is that would apply to guests not tenants?   Is there some form or a rider that a tenant can sign?

brett blessen

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Answer:

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    The Standard Form Contracts all contain a provision that states that "there are no third party beneficiaries of this contract".   This is intended to make clear that only the subscriber who signs the contract is intended to be protected by the contract.  But you are well advised to be concerned about other parties and the scenario in your question is a perfect example.

    You can't install an alarm system in a tenant's  [even more so in a two family dwelling] premises without giving that tenant a right to rely on that system, whether it be intrusion, fire, temperature, or what have you.  Especially if the tenant is able to arm and disarm the system, has its own codes and control of the system.  In this case the tenant should be required to sign a Standard Form Contract; that contract can state that the landlord or another is paying the charges.  Alternatively, you need to make certain that the tenant's lease incorporates by reference your alarm contract and agrees to its terms [I prefer that the tenant sign a contract].

    Let's say the system is a fire system, or temperature.  The tenant has no control of the system and its installed and paid for by the landlord; maybe before the tenant takes possession.  In that situation you may not get the tenant's signature.  You would be prudent to insist that the landlord include something in its lease about the alarm contract.  In any event, you will have an indemnity provision in the landlord's alarm contract, and you better have E&O insurance.