Tenant Who Didn't Thoroughly Inspect Defective Building Can't Claim Fraud

February 20, 2022

What Happened: A Texas landlord leased a standalone building to a tenant for use as a restaurant. Even though the building needed a lot of work, the tenant accepted it “as is” without warranty of suitability for its intended restaurant use. The gamble came up snake eyes when the tenant discovered physical defects in the building while performing the construction work. The tenant stopped paying rent and claimed fraud when the landlord sued.

What Happened: A Texas landlord leased a standalone building to a tenant for use as a restaurant. Even though the building needed a lot of work, the tenant accepted it “as is” without warranty of suitability for its intended restaurant use. The gamble came up snake eyes when the tenant discovered physical defects in the building while performing the construction work. The tenant stopped paying rent and claimed fraud when the landlord sued. The case went to trial, with the landlord winning a directed verdict of $180,000 for the unpaid rent and $181,000 more in attorneys’ fees.

Ruling: The Texas appeals court rejected the tenant’s appeal and upheld the verdict.

Reasoning: The landlord didn’t commit fraud by failing to disclose the building’s structural defects. The lease included clear language indicating that the tenant assumed the obligation “to satisfy itself that the leased premises may be used [as intended] by independently investigating” without warranties from the landlord. Moreover, it could have discovered the problems before signing the lease since the landlord provided the keys to the building. But the tenant didn’t avail itself of the opportunity to make the kind of thorough inspection you’d expect a reasonably prudent businessperson to make before leasing a property for five years.

  • Uribe v. Briar-Ridge, LLC, 2021 Tex. App. LEXIS 9351, 2021 WL 5365104

 

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