Understanding Joint and Several Liability in Commercial Real Estate

By Published On: August 20, 20212.8 min read

Joint and several liability refers to a responsibility that is shared by more than one party in the same lawsuit. The wronged party possesses the legal right to sue any of the legally responsible parties for damages. All of the responsible parties can be sued if others cannot pay or if the injured party has yet to collect the full amount.

You may be able to protect your personal assets by forming an LLC and obtaining liability insurance.

The Nature of Joint and Several Liability

Joint and several liability heavily favors plaintiffs, who are guaranteed repayment of the damages by the court. Being given liability allows plaintiffs to collect from any (or all) of the responsible parties. There are different types of liability.

This liability contrasts with comparative fault laws, which have limitations on the amount that the injured party can collect from any one party by assigning them a proportion of “fault.” In the case of comparative fault laws, the injured party could only collect damages from each responsible party in that proportion.

In a case of joint and several liability, the plaintiff does not have to rely on being paid by the person most at fault. Rather, they can collect damages from any or all of the responsible parties in any proportion.

Issues with Joint and Several Liability

Due to the plaintiff’s power in cases of joint and several liability, critics of the concept point out that the injured party can take advantage of the situation. For example, they could strategically receive full payment for the damages by adding a wealthy company or individual to the list of responsible parties, even if that party is not as responsible as others.

Due to this potential abuse by the injured party, many U.S. states restrict the usage of joint and several liability. Their courts may take an approach that combines this liability with a comparative fault law strategy, such as restricting the responsible parties to those deemed at least 50% at fault for the damages. This is called a “hybrid” approach.

Uses of Joint and Several Liability

Often, joint and several liability is used for multiple injured parties to receive payment for damages from multiple corporate entities. For instance, workers exposed to dangerous working conditions can hold multiple employers, architects, managers, or others responsible for the damages.

In commercial real estate, joint and several liability can occur as the result of a shared commercial lease. In that case, multiple parties could be responsible for a share of the total lease payments. If they are jointly liable, the other party can receive payments from any of them.

Additionally, jointly liable parties could be sued in the same lawsuit for the same debt. This has occasionally come into conflict with res judicata, which states that a matter ruled on by a competent court cannot be continuously pursued by the same parties. For instance, a landlord may sue one jointly liable tenant, receive some of the payment, and then attempt to sue other liable tenants for the rest.

However, cases such as DKN Holdings LLC v. Wade Faerber have argued that joint and several liability does not conflict with res judicata. The suits may be over the same grievance, but since they are against different, equally liable parties, the landlord can sue for the remainder of the damages.

Understanding Joint and Several Liability in Commercial Real Estate

By Published On: August 20, 20212.8 min read

Joint and several liability refers to a responsibility that is shared by more than one party in the same lawsuit. The wronged party possesses the legal right to sue any of the legally responsible parties for damages. All of the responsible parties can be sued if others cannot pay or if the injured party has yet to collect the full amount.

You may be able to protect your personal assets by forming an LLC and obtaining liability insurance.

The Nature of Joint and Several Liability

Joint and several liability heavily favors plaintiffs, who are guaranteed repayment of the damages by the court. Being given liability allows plaintiffs to collect from any (or all) of the responsible parties. There are different types of liability.

This liability contrasts with comparative fault laws, which have limitations on the amount that the injured party can collect from any one party by assigning them a proportion of “fault.” In the case of comparative fault laws, the injured party could only collect damages from each responsible party in that proportion.

In a case of joint and several liability, the plaintiff does not have to rely on being paid by the person most at fault. Rather, they can collect damages from any or all of the responsible parties in any proportion.

Issues with Joint and Several Liability

Due to the plaintiff’s power in cases of joint and several liability, critics of the concept point out that the injured party can take advantage of the situation. For example, they could strategically receive full payment for the damages by adding a wealthy company or individual to the list of responsible parties, even if that party is not as responsible as others.

Due to this potential abuse by the injured party, many U.S. states restrict the usage of joint and several liability. Their courts may take an approach that combines this liability with a comparative fault law strategy, such as restricting the responsible parties to those deemed at least 50% at fault for the damages. This is called a “hybrid” approach.

Uses of Joint and Several Liability

Often, joint and several liability is used for multiple injured parties to receive payment for damages from multiple corporate entities. For instance, workers exposed to dangerous working conditions can hold multiple employers, architects, managers, or others responsible for the damages.

In commercial real estate, joint and several liability can occur as the result of a shared commercial lease. In that case, multiple parties could be responsible for a share of the total lease payments. If they are jointly liable, the other party can receive payments from any of them.

Additionally, jointly liable parties could be sued in the same lawsuit for the same debt. This has occasionally come into conflict with res judicata, which states that a matter ruled on by a competent court cannot be continuously pursued by the same parties. For instance, a landlord may sue one jointly liable tenant, receive some of the payment, and then attempt to sue other liable tenants for the rest.

However, cases such as DKN Holdings LLC v. Wade Faerber have argued that joint and several liability does not conflict with res judicata. The suits may be over the same grievance, but since they are against different, equally liable parties, the landlord can sue for the remainder of the damages.