The Law

Business Potential Responsibility by Ron Davis Reliance by a tenant of a New York shopping center on business estimates that the owners orally provided was obviously a big mistake. The shopping center is located in the Syracuse area. And the tenant briefly operated a Mexican restaurant there until insufficient patronage resulted in the business’ closure. The center’s owners responded to the closing by suing the tenant, seeking back rent that the tenant owed. The tenant, however, blamed the center’s owners for the business flop. He claimed that a principal of the center made false statements to him. In particular, he added, the statements gave him the impression that he would have sufficient customer volume and sales for business success. Such misrepresentations, he charged, were acts of fraud. The owners pointed out, however, that the lease that the tenant signed protected against such charges as the tenant made. In fact, the terms of the lease state, in part: “Tenant acknowledges and agrees that neither landlord nor any representative of landlord nor any broker has made any representation to or agreement with tenant relating to the [center’s] premises, this lease, or the shopping center which is not contained in the express terms of this lease.” Furthermore, the lease states that the tenant “understands and agrees that tenant’s execution and delivery of this lease is based upon tenant’s independent investigation and analysis of the business potential and expenses represented by this lease.” The lease concludes that “the tenant hereby expressly waives any and all claims or defenses by tenant against the enforcement of this lease which are based upon allegations of representations, projections, estimates, understandings or agreements by landlord or landlord’s representative that are not contained in the express terms of this lease.” Despite that disclaimer, a New York court denied efforts of the center’s owners to force the tenant to pay back rent estimated at $172,305.12. The center’s owners responded by appealing. A New York appellate court agreed with the center’s owners, referring to certain specific statements that are contained in the lease: “The landlord established that the tenant was prohibited from relying upon the representations of the landlord based on the terms of the lease. Moreover, the tenant acknowledged and agreed that the execution of the lease was based upon the tenant’s independent investigation and analysis of the business potential and expenses represented by the lease.” In so ruling, the court agreed that the tenant must pay the back rental and other fees of $172,305.12. ( Eklecco Newco, LLC. v. Q of Palisades, LLC (2012 WL 895503 [N.Y.A.D.4 Dept.]) Decision: March 2012 Published: March 2012