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Failure to Secure Collateral for Tenant Build Out

In this case, a property manager secures lease with a new tenant on behalf of a property owner. As part of the lease agreement the tenant is responsible for paying for their own build out for the space. The property manager engaged a contractor to build out the space on behalf of the tenant. The tenant ultimately does not move into the space and has no credible assets. The contractor sues the building owner for the payment of approximately $250,000, which is ultimately paid by the building owner. The building owner sued the property manager to recover its losses. The alleged negligence was that the property manager failed to obtain proper collateral and to investigate the financial credibility of the tenant.

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