South Dakota Commercial Landlord Required Disclosures: Essential Guide

Since the effective date of the South Dakota Constitution in 1889, which established the foundational legal basis for property rights, commercial landlords in South Dakota operate primarily under the principle of Caveat Emptor (Tenant Beware). Unlike residential property transfers which may require specific statutory disclosure tracks, commercial property owners have fewer mandated forms but significant common law and environmental liabilities.

The Disclosure Standard: Caveat Emptor

In South Dakota, a commercial landlord is generally not required to provide a formal property condition disclosure statement (SDCL 43-4-38; SDCL 43-4-43). However, a landlord may be held liable for fraudulent concealment if they fail to disclose a known latent (hidden) defect that is not discoverable by the tenant's reasonable inspection and involves an unreasonable risk of harm (Waggoner v. Midwestern Development, Inc., 154 N.W.2d 803).

Generally, disclosure is only required if:

1. They are asked a direct question by the tenant (in which case they must be truthful).
2. The defect is latent and poses a safety risk as defined by common law.
3. The lease agreement contractually requires specific disclosures.

Mixed-Use Property Disclosure

Per the South Dakota Supreme Court in Remington v. Iverson (2025 S.D. 1), if a commercial property includes residential dwelling units (e.g., a campground with living quarters or an apartment above a retail space), a Seller's Property Condition Disclosure Statement must be provided for the residential portions of the property, even if the transaction is primarily commercial.

Environmental Disclosures and Liability

While not always a "mandatory form" by state statute, environmental disclosures are critical to protect the landlord from future litigation:

• CERCLA (Superfund): Under federal law, anyone in the chain of title (including tenants and landlords) can be held liable for cleanup costs. Providing Phase I or Phase II environmental reports to a tenant is a best practice to document the property's state at the start of the lease.
• Asbestos (OSHA): Under 29 CFR 1910.1001, commercial building owners must disclose the presence of known asbestos-containing material (ACM) and "Presumed Asbestos Containing Material" (PACM) to tenants. PACM includes thermal system insulation and surfacing material in buildings constructed no later than 1980.
• Lead-Based Paint: The federal 1978 lead-based paint disclosure requirement (42 U.S.C. § 4852d) applies only to "target housing" (residential) and does not apply to purely commercial properties.
• Underground Storage Tanks (USTs): Landlords should disclose the location and status of any current or former USTs on the property.

Zoning and Use Restrictions

The burden of verifying that a property is suitable for a specific business use rests with the tenant. However, landlords should provide:

• Zoning Classification: Inform the tenant of the current municipal zoning (e.g., C-2 Commercial).
• Restrictive Covenants: Disclose any private deed restrictions or HOA rules that might prohibit certain types of businesses or signage.

Methamphetamine Manufacturing Disclosure (Residential Only)

SDCL § 43-32-30 specifically mandates disclosure of actual knowledge of prior methamphetamine manufacturing for residential premises. While a commercial landlord should disclose known lab history as a "material defect" to avoid common law concealment claims, commercial property is excluded from the specific statutory reporting penalties of this section.

Commercial Security Deposit Accounting

While not a pre-lease disclosure, SDCL 43-32-24.1 requires a commercial lessor to return a security deposit or provide a written statement showing the specific reason for any withholding within 60 days after the termination of the tenancy and receipt of the tenant's mailing address.

Best Practices for Commercial Landlords

1. Encourage Tenant Inspections: Explicitly state in the lease that the tenant has had the opportunity to inspect the premises and accepts them in their current condition.
2. Document Known Latent Defects: If you know the roof leaks under specific conditions or the HVAC has a recurring fault, disclose it in writing to prevent a "fraudulent concealment" claim later.
3. Verify ADA Compliance: While not a disclosure requirement, be transparent about which party is responsible for future accessibility upgrades.

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