Assignee Had Duty to Read Lease Documents

Facts: A tenant assigned its lease for office space. The assignee later claimed that the owner was required to pay a tenant improvement allowance (TIA). The assignee based its argument on lease drafts that had discussed a TIA. But the final version of the lease, which the tenant and owner signed, didn’t have a TIA provision. The owner refused to pay the TIA, arguing that it hadn’t agreed to pay it and that the lease didn’t obligate it to. The assignee said that because it had relied on its belief that the TIA provision had ultimately ended up in the lease, this was a case of fraud. After a series of court proceedings, a trial court ruled in favor of the assignee. The owner appealed.

Decision: An Alabama appeals court reversed and sent the case back to the lower court.

Reasoning: The appeals court noted that the assignee’s claimed reliance upon its belief that a TIA provision had been included in the final lease contract was unreasonable. It was directly contradicted by the written terms in the final version. The appeals court noted that, for purposes of fraud, there is a “reasonable-reliance” standard. This standard imposes on a plaintiff a general duty to read the documents received in connection with a particular transaction, together with a duty to inquire and investigate. Thus, a plaintiff who is capable of reading documents, but who does not read them or investigate facts that should provoke inquiry, has not reasonably relied upon statements that contradict the written terms in the documents, the appeals court concluded. Because the assignee and its attorney were “sophisticated parties to a commercial transaction,” they should have been able to do that, the appeals court determined. 

• Med. Park Station, LLC v. 72 Madison, LLC, April 2016