Where the landlord misrepresented the state of a building’s roof at the time the lease was executed, knowing that it could not be quickly repaired and that previous repair attempts had failed, the trial court’s finding for the tenant on the negligent misrepresentation claim was affirmed.
In Pryority Partnership v. AMT Properties, LLC, No. E2020-00511-COA-R3-CV (Tenn. Ct. App. Mar. 10, 2021), landlord and tenant executed a lease agreement for a commercial warehouse with the understanding that the tenant would operate a factory/machine shop in the building. At the time the lease was executed, the tenant knew that the roof leaked, but the landlord had represented that the roof would be quickly repaired. When the roof was not repaired six months into the lease, tenant did not make the scheduled payment under the lease, and the landlord brought this suit for breach of contract. The tenant filed a counter-complaint for breach of contract and negligent misrepresentation, and the trial court found for the tenant on both claims, which the Court of Appeals affirmed.
In addition to its contract claims, the tenant alleged that the landlord negligently misrepresented the condition of the roof when the lease was executed. A plaintiff seeking to prove a case of negligent misrepresentation must show that “(1) the defendant supplied information to the plaintiff; (2) the information was false; (3) the defendant did not exercise reasonable care in obtaining or communicating the information; and (4) the plaintiff justifiably relied on the information.” (internal citation omitted). Further, the misrepresentation must be a statement “of a material past or present fact” and “cannot be based on statements of opinion or representation of future events.” (internal citation omitted).
While analyzing this claim, the Court noted that “the proof [was] clear that the roof had been leaking extensively for a number of years,” and that numerous attempts to repair the roof had been unsuccessful. A representative of the tenant admitted that “he was aware the roof had been leaking at the time he signed the lease,” but stated that as of the June 1st least signing, the landlord had “assured him that the roof leaks could be remedied by August 1[.]” Tenant stated that it relied on this representation when deciding to execute the lease and that it had no idea how extensive the leaks actually were. Further, the trial court found that at the time the lease was executed, the landlord “had to know [that]…the roof needed to be replaced.”
The landlord argued that representations regarding the roof being repaired could not support a claim of negligent misrepresentation, as they were not statements of present fact. The Court of Appeals agreed that the “promises to repair the roof, as opposed to replacing it, did not constitute misrepresentations of a past or present fact.” But the Court also pointed out that the landlord “failed to disclose…that the building experienced significant water intrusion when it rained and that [landlord’s] attempts to patch the roof over a number of years had been numerous and largely unsuccessful,” instead telling the tenant that “the roof was capable of repair in short order.” The Court of Appeals agreed with the trial court’s determination that landlord should have known at the time the lease was signed that “the roof could not be quickly repaired so as to render the Warehouse tenantable, especially for the use intended by [tenant].” The Court, therefore, affirmed the ruling that landlord “engaged in negligent
misrepresentation concerning the state of the Warehouse’s roof at the time the Lease was executed.”
Landlord also argued that the tenant’s reliance on the representation was not justifiable, as the tenant should have “had the Warehouse’s roof independently inspected to determine the severity of the leaks.” The Court stated, though, that this argument sounded in comparative fault, and that since the landlord had failed to plead comparative fault when answering the counter-complaint, this argument could not be considered.
This case is an interesting analysis of the differentiation between a statement of past or present fact and a statement of future action within the context of a negligent misrepresentation claim. While the promises to repair the roof could not have supported this misrepresentation claim, the tenant did a good job of showing that the statements that the roof was in such a condition that it could be easily and quickly repaired were actually statements of present fact.
NOTE: This opinion was released three months after oral arguments in this case.