A magistrate judge in the United States District Court for the District of New Jersey has held that a bank owes a duty of care to prospective purchasers of a foreclosed residence. The underlying case concerned a prospective buyer who tripped on a piece of broken glass while visiting a foreclosed home, causing her to fall and resulting in serious injuries. The injured party filed suit against the bank, real estate agent, real estate agency, and maintenance contractor.
In support of its motion for summary judgment and in opposition to plaintiff’s motion for summary judgment, the bank argued that it could not be held liable because the real estate agent’s failure to inspect the property and failure to correct the hazard was a superseding intervening cause of the plaintiff’s liability. The bank also argued that it had no relationship with the prospective purchaser and no knowledge of the broken glass, and that requiring owners to conduct daily inspections of foreclosed properties would establish a dangerous precedent.
U.S. Magistrate Judge Michael Hammer held that lenders taking possession of a foreclosed property assume the owner’s duty to protect business invitees from reasonably foreseeable injuries due to dangerous conditions. In making this determination, the Court noted that homeowners are in the best position to learn of dangerous conditions on their property, and observed that even the owner of a vacant property would be more likely to know of dangerous conditions on the property than an invitee. While the bank contended that it would be impossible to visit all of its properties on a daily basis, the Court stated that it could have exercised care by retaining an inspector to regularly visit the property. The Court further noted that the bank benefitted from marketing the house for sale and inviting plaintiffs onto the property.
The Court further held that the broken glass was a foreseeable condition, noting that approximately one month prior to the accident, local police had reported that a squatter had broken in and was living in the house. According to the Court, this incident made it reasonably foreseeable that the property would be vulnerable to damage that would harm an invitee.
The Court therefore granted plaintiff’s motion for summary judgment with regard to the duty of care, and denied the defendant bank’s motion. Magistrate Judge Hammer’s decision will stand unless a party requests review by the presiding district court judge.
If this decision stands, it is likely to result in similar actions against banks, which still retain many foreclosed properties acquired during the Great Recession. The decision also suggests that New Jersey courts may broadly interpret the scope of property owners’ duty to protect invitees from “reasonably foreseeable” risks.