Pre-lease representations sink landlord

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Landlords, or their realtor agents, often make assurances to prospective tenants about such things as future advertising plans, or expectations regarding future tenants of adjoining premises. Some of these landlord statements become incorporated into the lease; others do not. Commercial leases almost always contain an “entire agreement” clause, which confirms that there are no agreements or representations between the parties, other than what is set out in the written lease. This clause gives certainty to the “deal” between the parties, and is intended to prevent tenants from trying to rely on some previous statement given by the landlord outside the lease. If tenants wish to be clear that some such statement is part of their tenancy, they need to insist that the statement be put in the written lease.

Unfortunately, there remains some uncertainty in the law as to whether all such pre-lease statements are covered by the typical entire agreement clause.

In a recent B.C. decision, Campbell River Common Shopping Centre Ltd. v. Nuszdorfer, the court found that statements given by a landlord, prior to the lease being signed, were not covered by the entire agreement clause. These statements were found to have been untrue, and negligently given by the landlord. The entire agreement clause did not specifically excluded negligent misrepresentations, and the court went on to find that the clause was not effective to exclude liability for these pre-lease misstatements.

Lawyers drafting leases should re-visit their entire agreement clauses and ensure that these clauses specifically refer to negligent misrepresentations.

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