Am I liable to a prospective commercial real estate tenant in any manner whatsoever?

We have been preparing a space for a commercial tenant for nearly 4 weeks. We initially provided them with a non-binding LOI that detailed location, involved parties (that we were working exclusively w/them), and terms of lease options.We also mentioned possibility of another space for lease,without details.A seeming impasse has been met: tenant wants to display exterior sign, city requires permits, tenant says we should go thru permit process/we say they should. Tenant says if we don’t go thru necessary process for permit they will perhaps decide to pursue legal recourse. Do they have any?

Asked on June 13, 2012 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If the letter of intent was explicitly non-binding, it should not have created a contract. That means then that so long as you did not--

  • knowingly misrepresent anything of material significance (i.e. lie about anything important) to the tenant to get it to move ahead on the rental, or similarly did not knowingly omit to state anything which a reasonable landlord would have stated
  • did not outside of the LOI create any agreements with the tenant

--you should not be liable to them for anything: sometimes negotiations prove fruitless, and so long as there was no agreement or contract in place and no fraud (material misrepresentations or omissions), there should be no liabiltiy.

That said, the above is just a general principal: the specific facts are critical to a case like this, including the specific language of the LOI and other communications. You should review these things in detail with an attorney. Good  luck.

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