Misrepresentation of Material Fact in Commercial Real Estate

Misrepresentation of Material Fact in Commercial Real Estate

Texas has laws about truthfully representing the facts about commercial real estate for sale. For example, sellers must supply any certificates of mold damage remediation gathered in the last five years, as well as written notice of storage tanks on the property and compliance with construction requirements. When sellers don’t truthfully represent the condition of the property, they could face lawsuits from unhappy buyers.

What Is a Material Fact?

A material fact is anything that would make a difference to a buyer’s decision to purchase a property. Commercial real estate transactions often involve large sums of money and buyers are purchasing the property because they plan to use it to make money. Therefore, buyers are paying for the perceived value of the property and its suitability for commercial use. A seller who lies about improvements to the property or where the boundary lines are, for instance, is materially misrepresenting the property and breaking the law.

Other misrepresentations can include how much it costs to run the property (for instance the maintenance costs or how much the utility costs run), how old any improvements are, and what the drainage capacity of the soil is like.

If a realtor shows a prospective buyer an office building, and during the viewing the prospect notices a large crack in the floor causing vinyl tiles to separate, the buyer might decide against the purchase. The seller would be misrepresenting material facts if later, the realtor shows the building to another client and discovers the seller has covered the cracked flooring with carpet and hasn’t mentioned the crack in the disclosure form.

How Misrepresentation of Material Facts Occurs

When a seller hides facts or falsifies information related to a commercial property that would change the terms of the transaction, it is misrepresentation. For example, a seller could replace siding and sheetrock to hide structural damage or claim building systems are more efficient than they are.

It’s also misrepresentation if a seller conceals facts connected to the property. For example, if an employee committed suicide in the parking lot, the seller should disclose that to potential buyers.

What If It Happens to You?

In many situations, sellers don’t commit fraud intentionally, and a lawyer can help sellers prove that the misrepresentation was innocent.

If you purchased commercial property and you think the seller misrepresented material facts about the property, you can bring suit against the seller. The court will ask you to prove the following:

  • The seller misrepresented the facts and that you wouldn’t have completed the sale under those terms if you had known the truth,
  • that you suffered a loss from your purchase, and that the seller benefitted.

No matter which side you’re on, a real estate fraud attorney can represent your interests in court or at the negotiating table. Schedule a consultation with the attorneys at Bennett, Weston, LaJone & Turner today.

2020-12-01T22:00:41-06:00March 23rd, 2018|Real Estate, Fraud|
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