Liability Issues of Donated Buildings

​Municipalities often find themselves on the receiving end of donated property. City and town councils are often eager to accept these gifts, which are couched as free. When considered through the risk management lens, though, these freebies look expensive.

For a municipality to protect itself against premises liability claims, it must be able to demonstrate that it exercised reasonable care to protect individuals from harm resulting from conditions of which the city either had knowledge, or should have had knowledge. Municipalities must therefore perform due diligence to determine the condition of any properties they own or may receive as a donation.

Keeping complete documentation of all inspections and maintenance records that prove what was done is as important as doing it in the first place. The SC Municipal Insurance and Risk Financing Fund has guidelines for its members concerning regular property inspections, including simple checklists to help members focus on key areas such as housekeeping, fire alarm/detection systems, means of egress, hazard identification, and general property condition.

Cities should establish a property donation acceptance procedure which includes criteria regarding accepting the donation. This will ensure consistency, determine immediate and ongoing costs, and evaluate the suitability of the property for city use. Include the city’s risk coordinator and attorney in the process from the outset to help identify and address liability concerns early.

When faced with a donation, cities should also contact SCMIRF to discuss how the property addition may impact coverage or premiums before deciding whether to accept the donation.

Common concerns about donated properties include whether the property is vacant, and whether it has environmental hazards such as asbestos and underground storage tanks. Many donated buildings are either vacant or partially occupied, which poses increased risks of damage caused by fire, natural elements, vandalism because of a lack of maintenance, a lack of utilities and a lack of security.

Although cities may want to accept a donation with plans to modify the property, renovation or demolition of most properties is subject to state and federal asbestos regulations, as well as Occupational Safety and Health Administration standard 1926.1101. Although many uses of asbestos have been banned under Environmental Protection Agency and Consumer Product Safety Commission regulations, some materials remain legal for sale and use. The materials that were not banned included materials where asbestos fibers are generally well bound in the material.

Many flooring, insulation, and roofing products containing asbestos have not been banned. Officials should avoid assuming that a donated property, regardless of age or condition, is free of asbestos. Contact the SC Department of Health and Environmental Control for its list of certified property inspectors.

Contamination from underground storage tanks may also increase the municipality’s liability exposure. Conduct an assessment to determine if underground storage tanks are present, and if removal or cleanup is required. Cleanup must be done by companies that are certified by DHEC. Underground storage tank liability coverage is not part of the SCMIRF coverage contract. The municipality would need to purchase a separate policy, which adds to the donation’s true cost.