Mark Hotchin’s OHL Ltd was awarded $400,000 damages on purchase of an Auckland commercial building after real estate agents acting for vendor Premier Property Developments made a series of misleading statements about the basement tenant’s rent.
Initially led to believe the tenant was paying an agreed rental, OHL was later told a rental deferment was in place, only to learn after buying that the tenant was in fact paying no rent at all.
The Court of Appeal was told Premier Property’s director Manilal Hari listed for sale unit A at a commercial building in Auckland’s central business district with Colliers International appointed in 2017 as agent for the sale. OHL Ltd was identified as a likely buyer. It was in the process of buying neighbouring Unit B.
Colliers provided an information memorandum for potential buyers, describing unit A as being ‘fully leased,’ with three commercial tenants occupying a floor area of just over one thousand square metres.
The Court of Appeal ruled Premier Property breached the Fair Trading Act when its agent Colliers misled OHL about rentals paid by basement level tenant, Buza Ltd. And Premier Properties was also in breach of the Fair Trading Act by failing to inform OHL directly that Buza was paying no rent at all.
Only after agreeing to buy at $3.5 million in October 2018, did OHL become aware that Buza was not paying rent; Buza was arguing with landlord Premier Properties about the state of plumbing, electrical wiring and air conditioning in the basement area.
The Court of Appeal said a buyer in position of OHL would have paid only $3.1 million if it knew there was no rental income being received from the basement tenancy. It was entitled to $400,000 damages; the capitalised value of this lost revenue.
OHL did not have to take up Premier Properties later offer to guarantee payment of the basement rental for the balance of Buza’s tenancy, the court ruled. This guarantee was not unconditional. And OHL was justified in being wary of any new promises by Premier Property after its earlier misrepresentations about Buza’s rentals, it said.
OHL Ltd v. Premier Property Developments Ltd – Court of Appeal (5.09.24)
24.222