Don't Let Your Marketing Materials Become Exhibit A in Tenant's Fraud Lawsuit
We’ll give you three ways to protect yourself.
Marketing brochures and communications that describe your property, its amenities, and tenant mix are instrumental to attracting new tenants. But they can also get you into trouble if the information they contain is inaccurate. The risk is that disgruntled tenants may seize upon these inaccuracies to seek to get out of their lease and/or sue you for damages.
Fraud in the Inducement
The key legal risk associated with inaccuracies in marketing materials is fraud in the inducement, which occurs when a person makes fraudulent statements and representations to trick another person into signing a disadvantageous agreement. In legal terms, fraud negates the “meeting of the minds” required to form a contract, while entitling the injured party to get out of the agreement and sue for damages. To make out a case for fraud in the inducement, the purported victim, or plaintiff, must prove that:
- The defendant made a misrepresentation;
- The defendant knew of the misrepresentation’s falsity;
- The defendant made the misrepresentation to get the plaintiff to rely on it;
- The plaintiff did justifiably rely on the misrepresentation; and
- The plaintiff suffered damages as a result.
Inaccuracy in Mall Brochure Costs Landlord $50,000
A Bellevue, Wash., property manager learned firsthand how inaccuracies in marketing materials can expose a landlord to fraud in the inducement liability risks. The problems began when the owner of a shopping center created a brochure for the property that included the seemingly innocent phrase “retail space available” (emphasis added). However, the shopping center’s actual leases allowed tenants to use the property for either retail or nonretail purposes.
To the extent anybody noticed it, the inaccuracy must have at first seemed like no big deal. In fact, after a nonretail tenant—a government employment agency—moved into the center, most tenants saw a rise in their gross sales, because the agency’s clients would quickly spend their unemployment benefits checks at the center.
But one tenant actually experienced a decline in sales. Five years later, the tenant sued the landlord for lost earnings, claiming that it had decided to lease the space based upon the statement in the brochure, which induced it to believe, wrongly, that the center would house only retail tenants. The tenant proved the first four things necessary to show fraud in the inducement but was unable to show that it suffered harm as a result. As a result, the court didn’t award the tenant damages. Even so, the landlord had to pay attorneys $50,000 to defend the case.
3 Ways to Protect Yourself
Rather than going to court, the landlord would have been far better served by ensuring the accuracy of its marketing materials. There are three things you can do to ensure that inaccuracies in your own marketing communications don’t expose you to risk of fraud in the inducement lawsuits.
1. Double-check contents of marketing communications. Review your traditional and online sales and marketing communications to ensure that the information they contain is accurate and in accordance with the terms of your actual leases. Thus, rather than “retail space available,” the Washington shopping center would have been better served with brochure language indicating that the space was available for both retail and nonretail uses.
2. Frequently update your marketing communications. Things happen fast in a digital world, and there’s a risk that information that was accurate when you posted it becomes out of date within a short period of time. So, it’s essential to continually monitor and update your marketing communications as needs dictate. This is obviously simpler to do with online communications. That’s why you may want to ensure that your printed materials contain information that’s “evergreen” and/or are used only over a short cycle of, say, 60 to 90 days.
3. Include disclaimers. Last but not least, add general disclaimer language to your marketing communications to indicate that the information they contain is subject to change and not intended to be legally binding representations.
The information provided in this brochure or communication is for general information purposes only and is subject to change by the landlord from time to time. Nothing contained in this brochure or communication is intended to be a binding representation. The landlord makes no warranty as to the accuracy of the information contained in this brochure or communication, or as to the character, occupancy, or configuration of the property it describes. The landlord also reserves the right to make changes to the property, its character, occupancy, or configuration from time to time.