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Must a commercial property REALTOR disclose that the property is in foreclosure?

San Diego, CA |

I just signed a 2-year lease with a commercial broker and the property foreclosed 1 week into my tenancy. There were a couple of "red flags" but when I asked the broker if the property was in foreclosure, her response was, "a majority partner will be taking over the property." When I asked, is the property in escrow, her reply was "no." I've lost my deposit and my 1-month rent paid in advance. Do I have recourse? Was it material information? I also have to move out of the space and I've spend ~$2,000 in tenant improvements.

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Attorney answers 3

Posted

The fact that the landlord was losing possession and could not perform under the commercial lease is definitely a material fact that should have been disclosed by the realtor. I would say she is on the hook for your damages. You might want to report this to the Department of Real Estate.

Important things to remember: 1. The fact that I answered a question that you asked me on line, doesn't make me your lawyer. 2. Opinions are like noses--everyone has one. I just happen to think my opinions are right, but check with another lawyer too.

Asker

Posted

Thanks Frances. I know under commercial leases, tenants rights aren't always as clear as under residential leases. The question is, how much is she required to disclose if she never implied agency or she does not have a fiduciary duty to disclose. I am a real estate broker but typically work in the residential world. I am not too familiar with tenants rights under commercial lease terms.

Edna Carroll Straus

Edna Carroll Straus

Posted

yes indeed she had a duty to disclose --as Frances stated this is a MATERIAL fact. Tenants rights are VERY clear under commercial leases.

Posted

Real estate brokers and their agents have duties of disclosure which basically require telling their client's anything that a reasonable person would consider "material" (i.e. so important that the decision to purchase or walk away would change if such information were to be known). Furthermore, real estate agents and brokers also have a duty to truthfully answer questions asked by their clients - hiding the ball by intentionally providing ambiguous answers may be considered fraud. A local real estate attorney should be able to advise on whether disclosure duties have been violated.

- Paul

Paul J. Molinaro, M.D., J.D.
Attorney at Law, Physician, Broker
Fransen&Molinaro;, LLP
980 Montecito Drive, Suite 206
Corona, CA 92879
(951)520-9684
www.fransenandmolinaro.com / www.888MDJDLAW.com
"When you need a Lawyer, call the Doctor"

** This post and all others I make on Internet are for informational purposes only. None of the information or materials I post are legal advice. Nothing I post as comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.

Paul J. Molinaro, M.D., J.D. Attorney at Law, Physician, Broker Fransen&Molinaro;, LLP 980 Montecito Drive, Suite 206 Corona, CA 92879 (951)520-9684 www.FRANSENANDMOLINARO.com and www.888MDJDLAW.com “When you need a Lawyer, call the Doctor” ** This post and all others I make on Internet are for informational purposes only. None of the information or materials I post are legal advice. Nothing I post as comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.

Asker

Posted

Hi Paul, thank you very much. Do you believe that I have recourse with the previous owner, as well? I know that there is a clause in the commercial lease agreement which clearly states that the broker can accept the deposit and first month rent as part of the commission, if commission was due. Does that relieve the previous owner of damages?

Paul J Molinaro

Paul J Molinaro

Posted

Sellers/landlords of real property, whether residential or commercial, have duties of disclosure, and though the specifics of the duties may vary the common duty is not to conceal material information. One would generally find that failure to disclose that a property is about to be sold at foreclosure when inking a two-year lease is something that the tenant would find extremely important (i.e. material) to know. Holding a previous owner liable for new owners do with a lease may be difficult but the exact facts would need to be known and investigated to ascertain who knew what and when and what was done with that knowledge. - Paul Paul J. Molinaro, M.D., J.D. Attorney at Law, Physician, Broker Fransen&Molinaro;, LLP 980 Montecito Drive, Suite 206 Corona, CA 92879 (951)520-9684 www.fransenandmolinaro.com / www.888MDJDLAW.com "When you need a Lawyer, call the Doctor" ** This post and all others I make on Internet are for informational purposes only. None of the information or materials I post are legal advice. Nothing I post as comments, answers, or other communications should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship. While I try to be accurate, I do not guarantee accuracy.

Asker

Posted

Paul, thanks so much for the info. I will begin with a demand letter, certified mail. Then work from there. May be a small claims case.

Posted

I agree with the above attorneys. The department of real estate has a consumer help line here in San Diego. it is (619) 525-4192. Good Luck.

-Michael R. Juarez Law Office of Juarez and Schaeffer PO Box 16216 San Diego, CA 92105 (619) 804-4327 www.jslaw.org Mike@jslaw.org This posting is provided for “information purposes” only and should not be relied upon as "legal advice." Nothing transmitted from this posting constitutes the establishment of an attorney-client relationship. Applicability of the legal principles discussed here may differ substantially in individual situations or in different jurisdictions.

Asker

Posted

Thanks Michael. I may use that phone number soon.

Michael Ryan Juarez

Michael Ryan Juarez

Posted

Your welcome. Sorry you have to deal with such an unsavory individual. If you want to go after your damages I'm happy to prep your small claims suit or litigate in civil court.