Case Study

A Five-Year Lease for Space That Could Not Be Occupied

The building’s approved occupancy was exhausted before the tenant signed. Only the landlord and its broker knew.

A lease is only as good as the building’s ability to deliver lawful occupancy. This is one example, anonymized.

The Assignment

A tenant secured commercial space for a multi-year occupancy and signed a five-year lease with the landlord, whose space was listed by the landlord’s own broker. The objective was simple. Take possession and open for business.

The Claim

The landlord and the listing broker presented the premises as available and leasable for the tenant’s intended use. Nothing in the listing, the negotiation, or the executed lease disclosed any limitation on the building’s occupancy.

The Finding

When the tenant applied for the certificate of occupancy required to take possession, the city denied it. The building’s approved occupancy had been fully allocated across existing tenancies, with none left to assign to the new lease. The condition sat in the municipal record before the lease was signed, and the landlord and the listing broker were aware of it. The space was never deliverable for the intended use.

The Responsibility

The duty to disclose did not fall evenly. A landlord who knows of a condition that prevents lawful occupancy and stays silent has concealed a material fact, which the law treats as a form of fraud rather than a lapse in diligence. A listing broker owes the other party to the transaction a duty to disclose material facts known to the agent. Representing the landlord is not a license to conceal. Both held the information. Neither disclosed it.

The Lesson

Occupancy and entitlement status must be verified independently, against the municipal record, before a lease is signed. The parties who hold that information are rarely the ones who volunteer it. A signed lease for space that cannot be lawfully occupied is not a tenancy. It is a multi-year liability.