Failure to Secure Credible Tenant

A broker representing a prospective tenant negotiated a long-term lease on a commercial building.  The tenant moved in and paid rent for approximately 6 months.  Subsequently, the tenant was unable to pay the rent and sold the company’s assets.  Because the building was single tenant occupancy and the economy in this region became depressed, the building owner was not able to rent the space to another tenant. Further, if and when they could rent the space, they would not be able to obtain the original rents as the market was now depressed.  The owner sued the broker for the value of the uncollected rent.   The alleged negligence in this case was that the tenant’s broker had an obligation to disclose any information regarding the financial condition of the tenant to the building owner. This case raises the legal issue of what obligations does a tenant/buyers broker have to the owners of the property and vise versa.

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