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Real Estate & Lease Litigation: June 2013 Archives

275 Washington St. Corp. v. Hudson River Int'l., LLC: Collecting Indemnification Damages in Commercial Leases

In a recent case, 275 Washington St. Corp. v. Hudson River Int'l., LLC, 465 Mass. 16 (2013), the Supreme Judicial Court ruled that a commercial landlord cannot recover post-termination damages under an indemnification clause until the original lease term expires.  In 275 Washington St. Corp., the tenant vacated the premises and ceased paying rent 18 months into a 12-year lease.  The lease included an indemnification clause that provided, "Tenant shall indemnify Landlord against all loss of rent and other payments which Landlord may incur by reason of such termination during the remainder of the term."  After the tenant vacated, the landlord terminated the lease, and, relying on the indemnification clause, demanded that the tenant pay the landlord's lost rent over the entire 12-year lease term, in addition to the unpaid rent that accrued prior to termination of the lease.  The landlord's total potential damages with interest exceeded $1,000,000.

Broker Beware

According to the Supreme Judicial Court, a real estate broker must "exercise reasonable care" not only in making representations about a property, but also in determining whether to rely on a seller's information about that property. See DeWolfe v. Hingham Centre, Ltd., 464 Mass. 795, 796 (2013). After roughly four years of looking, the Plaintiff in DeWolfe, a professional hair stylist, found a property he liked, thanks to newspaper and MLS listings by the sellers' broker. Id. at 796-98. The broker advertised the property as zoned with a "Business B" designation, which would permit "hairdresser" as a use on the scale Plaintiff anticipated. Id. Shortly after the conveyance, however, Plaintiff learned the property in fact was zoned "Residential B," a designation permitting perhaps a small, home-based hairdressing business but not the six-station hair salon Plaintiff had planned to establish. Id. at 798.

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