SOMETIMES IT DOES NOT MATTER WHAT THE WRITTEN AGREEMENT SAYS, YOU WILL STILL BE IN COURT
Landlords are often cautioned against representing the square footage of premises to a tenant. Accurate measurement is difficult; and there are many different ways to measure square footage. Thus, most listings for rental space described the square footage as “approximate.” The American Industrial Real Estate form lease, which is one of the most often used forms for California for commercial leases, goes even further. Paragraph 2.1 states:
“… Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.”
Paragraph 2.4 further provides:
“Lessee acknowledges that: (a) it has been advised by Lessor … to satisfy itself with respect to the condition of the Premises … , and their suitability for Lessee’s intended use, [and] (b) Lessee had made such investigation as its deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises … .”
Kelly McClain’s lease with her landlord contained those paragraphs and described the leased premises as “approximately 2,624 square feet.” So when Ms. McClain sued her landlord alleging that her premises was not 2,624 square feet, it was no surprise when the trial court said she did not have a case.
However, the California Court of Appeal thought otherwise. In McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784 (2008) the Court pointed to California Civil Code Section 1668 which states:
“All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”
The Court concluded:
“[T]he terms of the lease—including the exculpatory provisions in paragraph 2.1—do not bar McClain from asserting her fraud claim or showing that the misrepresentations reasonably induced her to accept the lease…. [T]he fact that Paragraph 2.1 put McClain on notice that the [Lessor’s] representations of size were approximations does not preclude her from showing that they were, in fact, materially and unreasonably inaccurate…. McClain alleges that the [Lessor] exaggerated the size of her unit by 186 square feet, or 7.6 percent of its actual size, and increased her share of the common expenses by 4 percent through a calculation that understated the size of the shopping center by 965 square feet, or 8.1 percent of its actual size…. [T]hese discrepancies … cannot be regarded as de minimis or necessarily “near to” the actual sizes as a matter of law.”
The lesson learn: Landlords should be certain to be as accurate as possible when making representations about square footage, or not do so at all. Everyone should understand that a contract cannot exempt a party from his or her own fraud or willful injury.
