When Is a Property “Commercial” For Purposes of Sidewalk Liability Under NJ Law?

When Is a Property “Commercial” For Purposes of Sidewalk Liability Under NJ Law?

The issue before the court was how to determine whether a property is residential or commercial for the purpose of determining sidewalk liability under NJ law. The distinction is important given that residential property owners are generally not obligated to remove ice from the sidewalk.

The Facts of the Case

In Grijalba v. Floro, Plaintiff Jorge Grijalba walked on a sidewalk abutting Maria Floro’s property, slipped and fell on ice, and sustained an ankle fracture. He sued Floro and her estranged husband seeking compensation for his injuries.

The parties dispute whether the property is commercial or residential in nature. The plaintiff argues that Floro converted her owner-occupied two-family-zoned house into a basement-owner-occupied three-family house for the purpose of generating additional rental income. Because Floro used the property essentially like a business, the plaintiff contends that the property is commercial.

Meanwhile, the defendants contend that the court created a bright line rule in Smith v. Young, 300 N.J. Super. 82, 100 (App. Div. 1997) that all owner-occupied two- and three-family houses are considered “residential” for purposes of sidewalk liability law. Thus, they had no duty to remove the ice from the sidewalk.

The Court’s Decision

In determining the appropriate legal standard to apply, the Appellate Division noted that the New Jersey Supreme Court has rendered several opinions regarding the differences between residential  and commercial properties. We can extrapolate several themes from these cases regarding sidewalk liability law and the residential-commercial distinction, including that the residential-commercial distinction requires a case-by-case, fact-sensitive analysis that considers the commonly accepted definitions of “commercial” and “residential.”

In this case, the Appellate Division determined that the record must be more fully developed to resolve the residential-commercial distinction. As the court noted, it is unclear whether Floro used the property for business purposes, such as to make a profit, and if so, when and for how long. Questions also exist regarding whether Floro used the property during the relevant timeframe “in whole or in substantial part” as a place of residence, according to the court.

Going forward, the Appellate Division instructed the trial court to take a “totality of the circumstances” approach, which considers, at minimum:

• The nature of the ownership of the property, including whether the property is owned for investment or business purposes;
• The predominant use of the property, including the amount of space occupied by the owner on a steady or temporary basis to determine whether the property is utilized in whole or in substantial part as a place of residence;
• Whether the property has the capacity to generate income, including a comparison between the carrying costs with the amount of rent charged to determine if the owner is realizing a profit; and
• Any other relevant factor when applying “commonly accepted definitions of `commercial’ and `residential’ property.”

As this case highlights, the distinction between a residential and commercial property is not always clear, particularly when dealing with mixed-use properties. Nonetheless, the decision in Grijalba v. Floro provides a much-needed legal framework for determining liability.

If you have any questions about this case or would like to discuss the legal issues involved, please contact me, Sheri Siegelbaum, or the Scarinci Hollenbeck attorney with whom you work.